Hong Kong’s stock market has plummeted to its lowest level in more than 10 years after China doubled down on its punishing dynamic “zero COVID” pandemic strategy.
The Hang Seng Index on Tuesday plunged to below 17,000 points for the first time in 11 years, as Beijing tightened COVID curbs and reiterated warnings against any relaxation in the fight against the coronavirus.
Beijing’s doubling down on “zero COVID” comes as concerns over China’s economy are already elevated due to the United States’ crackdown on Chinese tech firms, rising interest rates globally, and domestic challenges, including a deflating property bubble.
Chinese tech shares had on Monday tumbled as much as 20 percent after US President Joe Biden announced new rules requiring firms to obtain a licence to sell advanced computing semiconductors to China.
“It’s connected to several things all going on at once – the zero COVID policy in China, worsening economic data from the mainland, rising interest rates globally, the Ukraine war, the property crisis on the mainland and now the Biden administration cutting off China from most advanced US semiconductor technology, which is sending chip stocks in Hong Kong, China and around the world plunging,” Peter Lewis, a former investment banker and host at Radio Television Hong Kong, told Al Jazeera.
Cities including Shanghai, Shenzhen, Xian and Fenang have ramped up testing and rolled out new restrictions, including neighbourhood lockdowns and school closures, to stamp out cases before a key Chinese Communist Party Congress that begins on Sunday.
In an editorial on Tuesday, the People’s Daily reiterated the need to stick to “zero COVID”, a day after calling on the public to have “confidence and patience” in spite of mounting economic damage due to stringent pandemic controls.
China’s economy is expected to grow just 2.8 percent in 2022, compared with the Asia-Pacific average of 5.3 percent, according to the World Bank.
Despite the tightening curbs, China’s nationwide COVID tally on Monday surpassed 2,000 cases, the highest in nearly two months.
Carlos Casanova, senior economist for Asia at UBP in Hong Kong, said policymakers had limited options to prop up the subdued investor sentiment at present.
“State funds typically step in to support Chinese onshore equities ahead of such events,” Casanova told Al Jazeera. “However, this time round will be different, as state funds have been busy stabilising the Chinese yuan against expectations of a stronger dollar into the year-end.”
