The Hang Seng index falls below 17,000 points as Beijing promises to stick to controversial pandemic strategy.
Hong Kong’s stock market has fallen to its lowest level in more than 10 years after China doubled down on its punitive dynamic “zero-COVID” pandemic strategy.
The Hang Seng index plunged below 17,000 for the first time in 11 years on Tuesday, as Beijing tightened COVID curbs and issued repeated warnings of easing in the fight against the virus.
Beijing’s doubling of “zero-COVID” comes amid already high concerns about China’s economy due to the United States’ crackdown on Chinese tech companies, rising global interest rates and national challenges, including a deflationary real estate bubble.
Chinese tech stocks fell as much as 20 percent on Monday after US President Joe Biden announced new rules requiring companies to be licensed to sell advanced computer semiconductors to China.
“It’s related to several things happening all at the same time — the zero-COVID policy in China, deteriorating economic data from the mainland, rising interest rates around the world, the Ukraine war, the mainland housing crisis, and now the Biden government telling China about it cutting edge US semiconductor technology that is crashing chip stocks in Hong Kong, China and around the world,” Peter Lewis, a former investment banker and presenter at Radio Television Hong Kong, told Al Jazeera.
Cities including Shanghai, Shenzhen, Xian and Fenang have ramped up testing and introduced new restrictions, including neighborhood lockdowns and school closures, to stamp out cases ahead of a key Chinese Communist Party congress that begins on Sunday.
In an editorial Tuesday, the People’s Daily reiterated the need to stick to “zero COVID,” a day after calling on the public to “trust and be patient” despite mounting economic damage from tight pandemic controls.
According to the World Bank, China’s economy is expected to grow just 2.8 percent in 2022, compared to the Asia-Pacific average of 5.3 percent.
Despite tightening curbs, China’s nationwide COVID tally topped 2,000 cases on Monday, the highest in nearly two months.
Carlos Casanova, senior economist for Asia at UBP in Hong Kong, said policymakers currently have limited options to shore up subdued investor sentiment.
“Government funds usually step in to support Chinese onshore stocks ahead of such events,” Casanova told Al Jazeera. “This time will be different, however, as government funds have been busy stabilizing the Chinese yuan against expectations of a stronger dollar through year-end.”