Global equity markets issue sceptical verdict on Xi’s third term
Investors worldwide issued a sceptical verdict on Xi Jinping’s third term in office, selling shares in Chinese companies after the country’s leader wrapped up a Communist party congress that signalled a shift in focus from the economy to security.
The sell-off began on Monday morning in Asia, where Hong Kong’s Hang Seng Tech index fell 9.7 per cent, a one-day move that matched its largest ever drop. It continued into the US trading day, where several of the most well-known Chinese tech groups listed on Wall Street fell sharply.
Nasdaq’s Golden Dragon index, which tracks US-listed shares in Chinese companies, fell 14.4 per cent as Alibaba, JD.com and Pinduoduo faced heavy selling. The record one-day drop for the index left it down by about 50 per cent this year.
Analysts said that the sell-off was compounded by Beijing’s release of economic data, delayed while the party conference was under way, that showed China’s economy grew by 3.9 per cent year-on-year in the third quarter, below the government’s annual goal of 5.5 per cent.
But they also noted that Xi’s overhaul of the party leadership during the week-long 20th party congress, which ended at the weekend, had given power to loyalists more concerned with China’s geopolitical rivalry with the US than with economic reform.
“The risk is more about groupthink and thought capture and the line about the dire need to struggle with the US,” said Gerard DiPippo, a former senior China economy analyst at the CIA. “It is reasonable from a market perspective that, whatever hope you had of a liberal turn in China, is probably lower now than it was on Friday.”
In the months leading up to the party congress, Xi had shown a growing disregard to economic reform, enforcing strict Covid-19 lockdowns despite its impact on the Chinese economy. He has also launched a regulatory crackdown on some of the country’s fastest-growing technology groups.
“Chairman Xi clearly wanted a team to execute on his vision,” said one US industry executive.
Frank Benzimra, head of Asia equity strategy at Société Générale, said investors had been unsettled by the shift in membership of the party’s top leadership body announced on Sunday, which was stacked with cadres more focused on national security than economic reform.
“While Chinese politics have long been opaque, this sharp consolidation of power is adding to investor unease,” said Mark Haefele, chief investment officer of UBS’s Global Wealth Management. “Equity valuations, already near a 10- year trough, will likely face more pressure if international investors demand a higher risk premium.”
Among the biggest corporate names to suffer in the sell-off was Alibaba, which closed 12.5 per cent lower in Wall Street…
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