Traders brace for fresh stock market falls as protests grip China

Chinese protest - MARK R CRISTINO/EPA-EFE/Shutterstock
Chinese protest - MARK R CRISTINO/EPA-EFE/Shutterstock

Traders were bracing for a fresh fall in the Chinese stock market on Sunday night amid fears that protests across the country would deepen its economic turmoil.

The looming threat of a government crackdown was expected to dampen demand for Chinese assets such as stocks, commodities and currencies when markets open on Monday morning.

Beijing authorities are facing the biggest wave of unrest in decades as students and workers take to the streets to challenge zero Covid measures in cities across China.

It is feared that the Communist regime will take draconian measures to end the protests, leading to further disruption after repeated lockdowns that have already damaged growth.

Ken Cheung, chief Asian currency strategist at Mizuho Bank in Hong Kong, said: “Sentiment may take a hit as the protests fuel concern over social instability in China, and foreign investors may trim exposure to Chinese investment.

“It appears that the zero Covid policy is reaching its tipping point. More easing or refinement on the Covid measures will be needed to curb discontent.”

China has sought to totally eliminate domestic coronavirus with an ultra-strict containment strategy that has forced businesses and consumers to repeatedly shut their doors over the past three years.

The country - which is also fighting to contain a property crash - has repeatedly flip-flopped on plans to open up.

China reported its fourth straight record day of new Covid infections on Sunday when another 39,791 cases were detected.

A record 412m Chinese people are currently under some type of lockdown measures according to analysis by financial services group Nomura. Only two thirds of those aged 80 and older have been vaccinated while even fewer have received a booster shot, meaning many are inadequately protected against the Omicron strain.

Mark Williams, chief Asia economist at Capital Economics, said the surge in Covid cases would likely be reflected in services output and the construction sector.

In a note to clients, he said: “The ongoing outbreak is now the most widespread in China since the initial one.

“Our mobility tracker has fallen to its lowest level since May when Shanghai was still in lockdown. We think this will translate into a hefty fall in the services PMIs and that worse is probably to come.”

The unrest came as new official Chinese data showed that industrial businesses' overall profits fell further in the period from January to October.

Profits declined by 3pc compared with during the same period last year, according to data compiled by the National Bureau of Statistics.

The World Bank has predicted that China's economy will lag behind other Asian countries.