Chinese stocks to open in red as Covid lockdown spurs
On Monday, Chinese stocks are set to open as expanded Covid lockdown measures in major cities sparked concerns about the country's economic growth outlook, as Chinese stocks look set to open in the red.
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The decline in American depositary receipts was caused by Alibaba Group Holding Ltd., down 3.1% in premarket trade. The e-commerce peers of Pinduoduo Inc. fell 2.8% and JD.com Inc. lost 1.4%. Electric carmakers including Nio Inc. and Li Auto Inc. also fell. The CSI 300 Index, which closed at its lowest level in two years, had a 4.9% decline in China's CSI 300 Index, which closed at its lowest level in two years.
The rising Covid cases in Beijing have sparked fears of a citywide lock-down, with China s capital already putting some residential compounds under restrictive measures. The city has announced mass testing plans, following the footsteps of financial hub Shanghai, which has been in a standstill for almost a month.
Adam Montanaro, investment director at Aberdeen Asset Management, said that the fact that another major metropolitan city may be heading in the same direction is obviously bad news. The economy is getting more stretched and impacted by these lockdowns. After the Chinese central bank cut foreign exchange reserve ratio by one percentage point to 8%, stocks have narrowed down some of their losses. The decision will take effect on May 15.
Concerns about the economic costs of prolonged Covid restrictions, coupled with lingering delisting threats and muted economic support, have put the U.S. listed Chinese shares under pressure in recent sessions. The Nasdaq Golden Dragon China Index has dropped 15% since Beijing has pledged to stabilize financial markets on March 16.
More than a month after China policy makers announced easing measures were incoming, investors have been left underwhelmed as lending rates were left unchanged in April, according to Marvin Chen, Bloomberg Intelligence equity strategist. The window for more aggressive easing is getting smaller as the yuan continues to weaken, Chen said.
China asked 18 major online platforms, including some from Weibo Corp., Baidu Inc. and Zhihu Inc., to improve their systems to deal with violence on the internet. Baidu's shares fell 3%, while Zhihu was down 5.8% in U.S. premarket trading.
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