Published - October 24, 2022 @ 04:08 PM (EET)
After President Xi Jinping was confirmed to a historic third term as leader of the world's second-largest economy, shares of US-listed Chinese stocks tumbled in premarket trading Monday.
According to Wind data, The Hang Seng Index fell 6.4%, the biggest one-day decline since the global financial crisis in late 2008.
The selloff came after leader Jinping cemented his control over the ruling Communist Party and appointed a number of loyalists to the committee, with investors fearing this could be a negative for private firms.
Tech giants Alibaba (NYSE:BABA), JD.com Inc. (NASDAQ:JD), and Tencent closed down over 11% in Asia.
Economists of Bank of America said, "Some investors may worry about checks and balances" after the increase in the concentration of power at the top of the Chinese Communist Party.
However, the move could also lead to better execution of policy and "little political resistance against bolder reforms or changes to existing policy stances," the economists said.
Foreign investors sold a record $2.5 billion of mainland shares via exchange links in Hong Kong, the biggest outflow since the scheme was launched in 2014.
The CSI 300 Index fell nearly 3%, while the offshore yuan declined to the weakest level against the dollar on record, slipping below 7.30.
WHY IT MATTERS
Last week, at the Chinese Communist Party's National Congress, Jinping said that there would be a strong emphasis on making China more of a prominent technological player in the world, but did not seem to address other economic concerns.
The outcome signaled the likely continuation of policies that have concerned foreign businesses, including the zero-Covid policies and China's deteriorating ties with the US.
China further delayed the release of its third-quarter gross domestic product (GDP) figure without offering an explanation, which was expected to have been around 3.4%.
The collapse in Chinese stocks stands in contrast to global shares, which had their best weekly performance since July last week.
