China stocks listed in the U.S. tumbled Monday along with U.S. multinationals with big exposure to China, like Tesla and Starbucks.
The bloodbath for Chinese stocks followed President Xi Jinping's shock weekend moves to consolidate his grip on power.
Fresh economic data also showed the country missing its growth objectives.
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Xi Jinping's Ruthless Masterstroke
On Sunday, President Xi gained an unprecedented but expected third term as leader, following a weeklong Communist Party congress. But Xi stunned his countrymen and women, as well as China observers abroad, by packing the party's innermost circles with loyalists.
Leading six black-suited men onto a red-and-gold stage, Xi portrayed an image of absolute authority. At the same time, his predecessor Hu Jintao was practically frog-marched out of the Community party congress in Beijing.
The Hang Seng HSI index dived 6.4% overnight. The Shanghai Composite index shed 2%.
Under Xi, China has tightened curbs on the tech sector, casino companies, and Chinese firms trading on U.S. exchanges. In August, Alibaba posted its first quarterly revenue decline, roughly two years after Beijing nixed the Ant Group IPO, which was expected to be a blockbuster.
Xi continues to champion the "Covid zero" policy that has limited coronavirus outbreaks and deaths but had a significant impact on China's economy.
China Tech Stocks, China EV Stocks Slide
On the stock market today, the Invesco Golden Dragon China ETF, which tracks the Nasdaq Golden Dragon index composed of U.S.-listed Chinese companies, gapped down 14.2%, hitting the lowest level in nearly a decade.
Since peaking in February 2021, the PGJ ETF had already lost more than 70% of its value through September 2022. China's regulatory crackdown on tech companies chilled investor sentiment.
Also on Monday, new data showed China's economic growth quickened in the third quarter to 3.9%, slightly better than expected. But that fell below Beijing's annual target of 5.5%. September industrial production growth topped estimates while retail sales fell short. The economic reports had been delayed until after Xi secured his third term, adding to doubts about the figures' accuracy.
Among top holdings in the Golden Dragon China ETF, Alibaba and JD.com crumbled roughly 13% each. Pinduoduo tanked 25% Monday. Baidu and Trip.com also lost 13% and 15%, respectively, with BIDU stock tumbling to a 12-year low. NetEase shed 10%.
China EV stocks Nio and Li Auto, which are also among the top 10 stocks in the PGJ exchange traded fund, gave up 16% and 18%, respectively.
Tesla, Chip Stocks
On the Nasdaq-100 index, Tesla stock gave up 1.5% Monday, but slashed losses after hitting a fresh 16-month low intraday. Tesla announced price cuts in China on Monday, an expected move amid Chinese demand concerns.
But Apple and Microsoft rose around 2% each. Nvidia closed up 1.1%, reversing losses earlier in the day.
Tesla derives nearly 45% of its total global revenue from the U.S. and 25% from mainland China, FactSet shows. The corresponding numbers are 16% and 26% for Nvidia. Apple and Microsoft also have substantial, but relatively less, China exposure.
Among chip stocks besides Nvidia, Taiwan Semiconductor retreated nearly 4% Monday and Marvell Technology gave up 2.9%, while AMD lost a fraction. Some of their losses may be tied to China exposure though company-specific factors are likely also at work.
Marvell derives 43% of its revenue from China. Both AMD and TSM are also significantly exposed to the country, with Taiwan Semi facing the additional risk that Xi will try to seize Taiwan by force.
Semiconductor stocks tumbled in recent weeks. The U.S. curbed chip and chip-tech exports to China, first in early September and then adding new restrictions in early October.
Xi's tight grip on power raises concerns of a further U.S.-China economic and technology decoupling.
Starbucks, Casino Stocks
Among S&P 500 companies, Starbucks dived 5.5% Monday. The coffee chain gets 12% of its revenue from China. But some casino stocks took even bigger hits. Las Vegas Sands plunged 10.2% and Wynn Resorts lost 3.9%.
China makes up 68% of revenue for the former and 40% for the latter. The casino stocks were already reeling from Xi and China's casino crackdown in Macau while seeking to promote tourism and sports instead. Macau is the world's biggest gaming hub.
On the Dow Jones Industrial Average, Nike and Walt Disney closed fractionally lower, bucking a 1.3% gain for the blue-chip index.
Nike has 15% revenue exposure to China and Disney 5%.
China ETFs
Besides the Golden Dragon China ETF, Xtrackers Harvest CSI 300 China A-Shares ETF lost 4.9% Monday. The iShares MSCI China ETF crashed 9.7%.
The former exchange traded fund holds the 300 largest Chinese mainland stocks. The latter ETF offers a broader mix of mainland, Hong Kong-listed and U.S.-listed stocks.
