China’s Communist Party Congress fails to drive a positive catalytic event: Hang Seng and BABA index tumbles in the early morning
The plunge comes at a time when members of China’s ruling Communist Party are meeting for the 20th Party Congress, a major leadership reshuffle that sets the tone for policy for the coming years.
In Hong Kong, the benchmark Hang Seng
(HSI) Index tumbled as much as 3% in Thursday’s morning trade. The stock was down on track to hit its lowest close in more than three years by early afternoon, according to Refinitiv.
The fall comes just a day after the city’s leader, Chief Executive John Lee, promised to invest billions of dollars to bring global talent and businesses back to Hong Kong.
The index was mainly dragged down by Chinese technology companies. BABA shares fell in Hong Kong. Tencent also lost a bit of money. It sank more than 7%.
The leader of China had no intentions of changing the country’s strict regulatory stance on businesses which have contributed to the lagging growth of the world’s second largest economy.
“China’s National Party Congress failed to drive a positive catalyst, ” said Yeap Jun Rong, a market strategist for IG Group, on Thursday. He mentioned that investors are worried about the rising Covid cases in Beijing.
Edward Moya, senior market analyst at Oanda in a research note on Wednesday, claimed that China might not want their data to be released during the congress because of the ugly nature of it.
The first simultaneous slump since May 2020 was caused by surging inflation and rising interest rates, as well as COvid-19 curbs at home disrupted output and consumption.
Outbound shipments in October shrank 0.3% from a year earlier, a sharp turnaround from a 5.7% gain in September, official data showed on Monday, and well below analysts’ expectations for a 4.3% increase. It was the worst performance since May 2020.
The Chinese Economy in the Context of the COVID-19 Crisis: Evidence from the Year-End Market Impact on Chinese Exports and Business
The data suggests the demand is not up to date, and more pressure is placed on the country’s manufacturing sector due to persistent COVID-19 curbs, as well as global recession risks.
Chinese exporters weren’t even able to capitalize on a further weakening in the yuan currency and the key year-end shopping season, underlining the broadening strains for consumers and businesses worldwide.
The weak export growth likely reflects both poor external demand and the supply disruptions that have taken place due to COVID, as well as being a symptom of the poor state of the economy, according to Zhiwei Zhang at Pinpoint Asset Management.
Apple said it expected lower than anticipated shipments of high-end iPhone 14 models, which were cut at a plant in China.
“Looking forward, we think exports will fall further over the coming quarters. Demand for consumer goods is likely to fall again because of the shift in consumption patterns that pushed up demand during the Pandemic.
“We think that aggressive financial tightening and the drag on real incomes from high inflation will push the global economy into a recession next year.”
The strict COVID-19 containment policy that has been in place since the beginning of the Pandemic has caused a lot of unhappiness and has exacted a heavy economic toll.
The world’s second-biggest economy is struggling to get out of its present rut after the third quarter rebound, suggesting it will have a tough time getting out from under the yoke in the last quarter of the year.
Fears that ideology could take precedence over economic growth were alleviated by policymakers last week who said they would push on with reforms and not let ideology take precedence.
China’s economy has seen its worst falter before covid shift intl-hnk since 1976, after Mao Zedong
The overall trade figures resulted in a slightly wider trade surplus of $85.15 billion, compared with $84.74 billion in September, missing a forecast of $95.95 billion.
China’s economy has been battered due to strict zero- covid policy and persistent property troubles. The lowest growth since 1976, when former leader Mao Zedong died, is predicted to happen in 2022, when the rate is expected to be 3%.
There were indicators pointing to a decline in economic activity last month. Retail sales in November declined by 5.9% from a year ago. It was the worst contraction in retail spending since May, when widespread Covid lockdowns, including in the country’s richest city Shanghai, pummeled the economy.
Investment in the property sector, which accounts for as much as 30% of China’s GDP, plunged by 9.8% in the first 11 months of the year. Property sales dropped by more than 26%.
In November of last year, Covid outbreak spread to most parts of the country, forcing residents to cut travel and stay indoors, which caused consumption to go down, according to a statement from the National Bureau of Statistics.
He noted that consumption activities involving personal interaction, for example travel or dining, were greatly affected. Revenues from the Catering sector declined last month.
Sales of big-ticket items — such as cars, furniture, and high-end consumer electronics — also contracted sharply, as consumers were wary of spending amid worries about a weak economy. Spending on household appliances and telecoms devices plummeted. Car sales dropped over 4%.
Source: https://www.cnn.com/2022/12/15/economy/china-economy-falter-before-covid-shift-intl-hnk/index.html
Remarks on the State of the Union on the Development of the World Economy and the Prospect for a Long-Term Future of Consumption and Investment
The State Council and Central Committee of the Communist Party issued a plan to expand domestic demand and encourage consumption and investment into the foreseeable future. It cited rising external risks, including global economic and geopolitical uncertainties.