by Global stocks and oil prices slid on Monday after protests in China over the government’s Covid-19 policies weighed on market sentiment and increased uncertainty over the outlook for the world’s second-largest economy.
In Hong Kong, the Hang Seng China Enterprises Index fell as much as 4.5 percent before rebounding, losing 1.5 percent. China’s CSI 300 index of stocks listed in Shanghai and Shenzhen fell as much as 2.8 percent before being trimmed to about 1.1 percent.
Demonstrations against government-imposed pandemic restrictions erupted in Beijing, Shanghai and other cities over the weekend. Discontent has risen since a fire in the city of Urumqi killed 10 people on Thursday, prompting vigils across China as authorities dismissed allegations that coronavirus restrictions were hampering rescue efforts and preventing residents from entering the country to escape fire.
Europe’s regional Stoxx 600 slipped 0.8 percent in morning trade on Monday, while London’s FTSE 100 fell 0.5 percent. The S&P 500 should lose 0.9 percent, index-linked futures suggest, when Wall Street trading begins.
Oil fell sharply with Brent crude, the international benchmark, falling 2.8 percent to $81.31 a barrel and US marker West Texas Intermediate slipped 2.8 percent to hit $74.12.
Traders said the protests have added to uncertainty over China’s direction as a surge in Covid-19 cases has increased pressure on local officials to enforce President Xi Jinping’s strict zero-Covid policy.
“Investor confidence has already been hit this year and it’s hard to imagine where the market will go next,” said Louis Tse, chief executive of Hong Kong-based brokerage firm Wealthy Securities.
Tse said investors were worried about a lack of additional support for China’s economy as infections hit record highs, undercutting a rally that had pushed the Hang Seng China Enterprises Index up more than 17 percent this month.
The use of blank paper as a symbol of protest against censorship caused anger for some Chinese listed companies. Shanghai-listed shares of Shanghai M&G Stationery, a paper supplier, fell as much as 3.1 percent on Monday. In an exchange file, it clarified that a statement circulated on social media claiming the company had stopped selling A4 paper “to safeguard national security” was fake.
The increasingly gloomy prospects for China’s economy also weighed on the renminbi. The Chinese currency fell as much as 1.1 percent against the dollar to Rmb 7.24.
The US dollar index, which measures the greenback against its international peers, was down 0.4 percent in early European trade, benefiting in part from a “flare in China risks,” said Lee Hardman, currency analyst at MUFG.
Martin Petch, vice president of Moody’s Investors Service, said the protests “have the potential to damage creditworthiness if they continue and provoke a more forceful response from authorities.”
“While this is not our baseline scenario,” he added, “this would lead to an increased level of uncertainty about the extent of political risk in China, leading to damaged confidence and hence consumption in an already weakened economy.” “
The unrest weighed on stocks elsewhere in Asia, with Japan’s benchmark Topix slipping 0.7 percent while South Korea’s Kospi and Taiwan’s Taiex both fell 1.5 percent.
