Today, the leading Chinese stock indices sank noticeably under the influence of a number of negative external and internal factors. Last week, investors began to worry that tough Western sanctions against Russia could indirectly hurt China as well, as well as the problems of some Chinese technology companies in the US. Today, the negative background was intensified by a new outbreak of COVID-19 in China.
Hong Kong’s Hang Seng stock index sank nearly 5% on Monday, down 7.6% since March 10. Among the leaders of decline in trading in Hong Kong were quotations of technology companies – the sectoral Hang Sang Tech Index lost 11%, showing the maximum drop since July 2020. Another sectoral index, Hang Seng China Enterprises, lost 7.2% today, the highest since November 2008, when the global market was in the midst of the financial crisis. The Shanghai Stock Exchange SSE Composite index fell 2.6% today, having lost 4.5% since March 8.
Some media are already dubbed this situation of “panic sale” in the Chinese markets, caused by a number of external and internal factors.
The first such factor was Western sanctions against Russia, which may indirectly affect China. “If the US decides to impose sanctions on China as a whole or on individual Chinese companies operating in Russia, this will cause concern,” noted investor Mark Mobius was quoted by Bloomberg. “Now this whole story is up in the air.”
Another negative factor is the growing problems of Chinese technology companies in the US. Last Friday, the quotes of these enterprises noticeably sankafter the US exchange regulator named five Chinese companies that could be delisted from US exchanges due to failure to comply with financial disclosure requirements.
The day before the Securities and Exchange Commission (SEC) statedthat HUTCHMED (China) Limited, ACM Research, Zai Lab Limited, Yum China Holdings, and BeiGene have not complied with the December 2020 Foreign Companies Accountability Act (HFCAA) and have not submitted audit reports to U.S. regulators for the past three years. The SEC emphasized that the said companies may file their objections by March 29, otherwise the commission may begin the delisting procedure.
Already today another negative factor has become another flash COVID-19 in China, which is why the country’s authorities have introduced a lockdown in two megacities at once – the cities of Shenzhen (population 17 million people) and Changchun (population 9 million people). The restrictions have already led to the suspension of the Shenzhen facilities of Foxconn, Apple’s leading supplier. “The date for resuming our operations is subject to the decision of the local authorities,” Foxconn said. “We are currently restructuring our production chain in China to minimize the negative impact of the suspension.”