HONG KONG: Hong Kong stocks plunged today as technology firms were hit by news that the country's tech hub Shenzhen was put into lockdown, compounding concerns over China's crackdown on the sector.
The Hang Seng Index dived 4.97%, or 1,022.13 points, to 19,531.66 – dropping below 20,000 for the first time since mid-2016.
The Hang Seng Mainland Properties Index also witnessed its worst daily performance, closing down 12.6% and marking its lowest level since January 2017.
In mainland China, the Shanghai Composite Index sank 2.60%, or 86.21 points, to 3,223.53, while the Shenzhen Composite Index dived 2.93%, or 63.68 points, to 2,109.46.
Falls were exacerbated by heavy selling by foreign investors through China's Stock Connect programme. Refinitiv data showed outflows totalling 11.04 billion yuan (RM7.3 billion) on the day.
China said yesterday it will place all 17 million residents in Shenzhen under lockdown as it battles a flare-up of Covid-19 cases across the country.
Public transport has been suspended and officials have told all residents to stay at home, with the lockdown set to last until March 20 while three rounds of mass testing are carried out.
The move has led Foxconn, which is a key supplier for Apple and maker of iPhones, to halt operations in the city.
The Taiwanese firm, which is also known as Hon Hai Precision and has its Chinese base in the city, did not say how long it would keep its plant shut, but had relocated production to other sites.
The Hang Seng Tech Index shed around 10% today, with market heavyweights Alibaba and Tencent down a similar amount.
“The first-channel effect of Shenzhen’s lockdown in Asia-Pacific markets is tech equities,” Stephen Innes at SPI Asset Management said. “Second-order effects include the yet-to-be-determined impact on global supply chains and inflation, as well as growing domestic downside risks to China’s economy.”
The crisis has further rattled Hong Kong investors who have had to contend with China’s regulatory crackdown on the private sector, with once-flying technology companies often in the crosshairs.
It follows a rout of Chinese firms listed in the United States last week that was sparked by concerns about a crackdown by authorities there.
Five companies have been ordered to comply with audit requirements by the US Securities and Exchange Commission or face delisting from Wall Street.
The initial group of companies named on the list Thursday could soon be followed by all Chinese companies traded in New York, none of which are currently complying with US regulations in this area.
That came as Bloomberg News reported on Friday that China's leading ride-hailing company Didi Global had put plans to list in Hong Kong on hold as it struggles to appease Beijing over its handling of user data.
“At this stage, we still see the technology space as very vulnerable,” said Jun Li, of Power Pacific Investment Management. “It is very difficult to evaluate the risk profile at this stage.”
The rapid spread of the virus in China is heightening investors' worries over slowing growth, highlighted today by figures showing new bank lending fell more than expected in February while broad credit growth slowed.
It has also reinforced expectations that China's central bank could move as soon as tomorrow to cut key interest rates to support growth.
“I think the outbreaks impose downside risk to China’s economy, at least in the next few months,” said Zhiwei Zhang, chief economist at Pinpoint Asset Management.
The CSI Tourism index plunged 6.3%, as investors fretted over the impact of strict control measures. It led a 3.1% fall in the blue-chip CSI300 index, and a 2.6% drop in the Shanghai Composite - the index's biggest daily drop since July 24, 2020. – AFP, Reuters
