China stocks fluctuate as Covid-19 outbreak clouds economic revival efforts while VIE stance boosts tech start-ups
- Stocks post small gain as China faces the worst Covid-19 outbreak in almost a year, clouding economic recovery outlook
- Clarity on regulatory stance regarding Chinese VIE-type companies in offshore markets seen aiding tech start-ups
Stocks in mainland China fluctuated as traders weighed the economic fallout from a resurgence in Covid-19 cases in several provinces while the market watchdog clarified its stance on contentious listings in offshore markets.
The Shanghai Composite Index rose 0.2 per cent to 3,624.98 at the midday trading break. The ChiNext gauge of start-ups in Shenzhen climbed 0.1 per cent. Shenzhen Pacific Union Precision Manufacturing rose 13 per cent in its Shanghai’s Star Market debut.
Industrial and energy stocks were the biggest gainers, with their sub-indexes rising at least 0.8 per cent, while consumer staple names provided the biggest drag with a decline of 1.3 per cent.
Trading was light, with the equity market in Hong Kong and the Stock Connect trading link with mainland bourses shut for a public holiday. Turnover in Shanghai was about 20 per cent below the 30-day average for this time of the day. In Shenzhen, the volume was 12 per cent below the average, according to Bloomberg data.
“The market is facing the challenges of economic slowdown, growing Covid infections and a vacuum in earnings reports,” said Zhu Bin, a strategist at Southwest Securities. “So sideways trading will probably persist until the annual results season next year.”
China reported 158 new daily local cases on Sunday in the most severe outbreak in the nation since January. Among these infections, 157 were found in the northwest Shaanxi province and one in southern Guangxi, according to official reports.
The resurgence has prompted strict lockdowns in some locations and hobbled several car-making plants, threatening efforts to revive growth in the world’s second-largest economy. China has injected liquidity while banks trimmed borrowing costs this month in signs of policy easing.
Meanwhile, the China Securities Regulatory Commission on late Friday said it will allow local companies to sell shares overseas as long as they register with regulators and meet compliance requirements. It would also apply to companies with so-called variable interest entity structure, it added. That will add some optimism to China’s offshore stocks, particularly the technology companies that have lost more than US$ 1 trillion of market value over the past year.
Author: Zhang Shidong, SCMP