Home Top Global NewsMarkets Covid outbreak: China stocks hit four-week low as cases spread and factory output shrinks

Covid outbreak: China stocks hit four-week low as cases spread and factory output shrinks

by Ozva Admin


Hong Kong
CNN Business

Chinese markets fell on Wednesday as global investors continue to deal with the aftermath of the Hardline speech by Federal Reserve Chairman Jerome Powell in Jackson Hole last week, and the alarming spread of Covid in China.

Investor sentiment was also affected by new official data from China which showed factory activity continued to contract in the world’s second largest economy following strict Covid lockdowns and a record heat wave.

Mainland China’s benchmark Shanghai Composite Index fell 0.8% to close at its lowest level in four weeks. So far this year, the index is down nearly 12%.

The Shenzhen Heavy Tech Components Index also fell 1.3% to its worst level in more than two months.

Japan Nikkei 225

(N225)
lost 0.4%. The Hong Kong Landmark Hang Seng

(HSI)
The index was flat. But Korea’s Kospi reversed earlier losses and closed 0.9% higher.

BYD, Chinese manufacturer of batteries and electric cars

(BYDDF)
plunged 8% in Hong Kong, after Warren Buffett’s Berkshire Hathaway

(BRKA)
said in a filing that it had sold around 1.33 million shares of Hong Kong-listed BYD

(BYDDF)
for HK$370 million ($47 million).

Following the sale, Berkshire’s stake in BYD has been reduced to 19.92% from 20.04%. the news followed weeks of speculation that Buffett could give up the largest local manufacturer of electric vehicles in China, which is hot on the heels of Tesla.

The losses in Chinese stocks came as the country battles an intensive wave of covid outbreaks. Every province in mainland China has identified locally transmitted COVID-19 cases in the past 10 days, according to CNN calculations based on data from the National Health Commission.

The rapid spread of cases has raised concerns about more lockdowns. Earlier this year, China placed Shanghai and other key cities under strict lockdowns for months, hurting consumer activity and disrupting global supply chains.

Earlier this week, authorities in Shenzhen, the country’s tech hub, shut down the largest Huaqiangbei electronics market and suspended nearby public transportation in response to a small number of Covid cases.

“The implementation of virus restrictions in various parts of [China’s] Larger cities continue to highlight their struggle to contain spreads,” said Yeap Jun Rong, market strategist at IG Group, adding that Beijing’s tough stance on covid zero means the country’s growth prospects could remain subdued. .

Also unsettling to investors is news that China’s huge manufacturing industry continued to shrink in August amid the country’s worst heat wave in six decades.

A government survey released on Monday showed the manufacturing purchasing managers’ index rose to 49.4 in August from 49 in July, but remained in contraction territory. The 50 point mark separates contraction from growth.

“Economic activities remained weak in August, in part due to power shortages caused by heat waves,” Zhiwei Zhang, president and chief economist at Pinpoint Asset Management, said in a note on Wednesday.

An unprecedented heat wave and drought have swept across southern China in the past month, causing power outages in industrial zones and disrupting operations at factories of several international companies, including Tesla.

(TSLA)
and Toyota.

The energy crisis has eased this week, with power supply restored to industrial users in Sichuan and Chongqing. But the main constraint on the economy, the zero covid policy, has not been removed, analysts have warned.

“The power shortage disruption is now receding,” but the Covid situation is “getting worse again,” Julian Evans-Pritchard, senior China economist for Capital Economics, wrote in a report on Wednesday.

“For now, the resulting disruption seems modest, but the threat of harmful crashes is growing,” he said.

— CNN Beijing Bureau and Simone McCarthy contributed to this report.

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