Chinese stocks recorded their biggest weekly drop in six weeks as strict Covid-19 lockdowns continued to hamper economic activity in many of its largest cities.
The yuan extended its losses too even as the Chinese authorities vowed to provide more help for its hard-hit firms.
Shanghai authorities doubled down on their offensive against the virus, launching another round of city-wide testing and warning residents their three-week lockdown would only be lifted in batches once transmission is stamped out.
“China’s financial market is not immune to the external shocks and the domestic Covid-19 situation is also putting more downward pressure on growth,” People’s Bank of China (PBOC) Governor Yi Gang said in a video speech to the annual Boao Forum for Asia.
China will continue to support the economy, and monetary policy will focus on supporting small firms and sectors hit by outbreaks, Yi added.
That support may be increasingly necessary as Covid-related curbs drag on.
“Rather than a rapid dropping of Covid restrictions, China looks to be headed for a slower, more gradual and more cautious reopening, a trajectory that implies disruptions to consumption and economic activity will persist beyond April,” Ernan Cui, an analyst at Gavekal Dragonomics said in a note.
China’s top securities regulator said on Thursday the economy remained healthy despite numerous challenges, asking institutional investors to invest more in equities to help limit short-term market fluctuations while contributing to economic restructuring.
On the same day, the government launched its first private pension scheme that will potentially channel more long-term money into the stock market.
Economy Support Pledge
The CSI300 index ended the day 0.44% higher at 4,013.25 points, after slumping as much as 1.1% earlier, while the Shanghai Composite Index closed 0.23% higher at 3,086.92.
But both indexes posted their biggest weekly losses since early March and remained near two-year lows, having erased almost all gains made following Vice Premier Liu He’s pledge on March 16 to support the economy and financial markets.
In Hong Kong, the benchmark Hang Seng was down in late afternoon trade while the Hong Kong China Enterprises Index edged 0.2% higher.
The Hang Seng Index shed 0.21%, or 43.70 points, to close at 20,638.52 while the Shenzhen Composite Index on China’s second exchange dropped 0.50%, or 9.70 points, to 1,914.11.
Adding to investor uncertainty around listed Chinese firms that has weighed on share prices, the US Securities Exchange Commission on Thursday added 17 companies, including Chinese names Li Auto, Ke Holdings and Zhihu Inc, to the latest batch of stocks potentially facing delisting from the United States.
China’s securities watchdog is holding regular talks with US regulators over audit cooperation and expects a deal soon, the vice-chairman of the securities regulator said on Thursday.
Nifty 50 Slides
Tokyo stocks dropped, following in the wake of losses on Wall Street after hawkish comments from the Federal Reserve about its monetary tightening plans.
The benchmark Nikkei 225 index lost 1.63%, or 447.80 points, to 27,105.26 while the broader Topix index fell 1.19%, or 22.85 points, to 1,905.15.
Indian stocks fell with Mumbai’s signature Nifty 50 index down 1.27%, or 220.65 points, to close at 17,171.95. Seoul, Sydney, Jakarta and Taipei were also all down.
Globally, stocks fell to five-week lows and bond yields rose as investors fretted about rate hikes in the United States and the euro zone.
US Federal Reserve chairman Jerome Powell said on Thursday that a half-point interest rate increase would be “on the table” when the Fed meets in May, adding it would be appropriate to “be moving a little more quickly.”
His remarks strengthened market expectations of at least another half-percentage-point rate hike next month, and Nomura now expects 75-basis-point hikes at the Fed’s June and July meetings, which would be the biggest since 1994.
MSCI’s world equities index was down 0.41% at its lowest since mid-March, and was heading for a 0.7% drop on the week.
Oil prices weakened, burdened by the prospect of interest rate hikes, weaker global growth and Covid lockdowns in China hurting demand, even as the European Union weighed a ban on Russian oil.
Key figures around 0715 GMT
Tokyo – Nikkei 225 > DOWN 1.63% at 27,105.26 (close)
Hong Kong – Hang Seng Index > DOWN 0.21% at 20,638.52 (close)
Shanghai – Composite > UP 0.23% at 3,086.92 (close)
Brent North Sea crude > DOWN 0.52% at $107.77 per barrel
West Texas Intermediate > DOWN 0.57% at $103.20 per barrel
New York – Dow > DOWN 1.1% at 34,792.76 (Thursday close)
London – FTSE 100 > DOWN 0.82% at 7,565.21
- Reuters with additional editing by Sean O’Meara