China investors fear autocracy risk 📉
Today we are seeing a massive discount in Chinese stocks. Xi Jinping's consolidation of power has raised concerns and worsened investor sentiment:
- China's most important decision-making body, the Politburo Committee, has been filled by Xi with six of his loyalists which has become the immediate cause of the crash and may be a harbinger of authoritarian rule;
- With such powerful influence over the country's most important body, Xi can resist criticism and maintain active, radical 'zero Covid' solutions that burden the Middle Kingdom's economy and development. The party can also maintain a restrictive attitude toward private entrepreneurs and technology companies;
- Xi Jinping, speaking at the Great Hall of the People on Sunday. Investors fear harsh political moves by China's leader in terms of military intervention in Taiwan, among other things. The international market shares concerns around China's tightening international policy, although European indices are doing well today, with contracts suggesting a higher opening for US indices;
- Xi Jinping's rivals have departed, with the president unprecedentedly elected to a third term despite exceeding the age at which previous presidents gave way to younger candidates;
- Late economic data from China pointed to a prolongation of the real estate crisis (a major drag on China's indexes recently), decelerating retail consumption in September and a rising unemployment rate. The economic recovery in Q3, although it occurred, the readings were far from euphoric levels.
Shares of Chinese companies listed in the US are credited with several percent sell-offs before the market opens. The stocks of Tencent (TME.US) and Alibaba (BABA.US) are losing mightily. The Krane Shares China Internet Index ETF (KWEB.UK), which gives exposure to Chinese companies doing business on the Internet, is losing nearly 12%. Source: Bloomberg
CHNComp Index, W1 interval. The index is losing nearly 8% today and is near the minimums of the 2008 financial crisis. The RSI has dropped around 23 points, signaling an oversold condition. The index of companies nootted on the Hong Kong Stock Exchange, HKComp, is doing similarly dismally. Source: xStation5
Start investing today or test a free demo
Create account Try a demo Download mobile app Download mobile appThe content of this report has been created by XTB S.A., with its registered office in Warsaw, at Prosta 67, 00-838 Warsaw, Poland, (KRS number 0000217580) and supervised by Polish Supervision Authority ( No. DDM-M-4021-57-1/2005). This material is a marketing communication within the meaning of Art. 24 (3) of Directive 2014/65/EU of the European Parliament and of the Council of 15 May 2014 on markets in financial instruments and amending Directive 2002/92/EC and Directive 2011/61/EU (MiFID II). Marketing communication is not an investment recommendation or information recommending or suggesting an investment strategy within the meaning of Regulation (EU) No 596/2014 of the European Parliament and of the Council of 16 April 2014 on market abuse (market abuse regulation) and repealing Directive 2003/6/EC of the European Parliament and of the Council and Commission Directives 2003/124/EC, 2003/125/EC and 2004/72/EC and Commission Delegated Regulation (EU) 2016/958 of 9 March 2016 supplementing Regulation (EU) No 596/2014 of the European Parliament and of the Council with regard to regulatory technical standards for the technical arrangements for objective presentation of investment recommendations or other information recommending or suggesting an investment strategy and for disclosure of particular interests or indications of conflicts of interest or any other advice, including in the area of investment advisory, within the meaning of the Trading in Financial Instruments Act of 29 July 2005 (i.e. Journal of Laws 2019, item 875, as amended). The marketing communication is prepared with the highest diligence, objectivity, presents the facts known to the author on the date of preparation and is devoid of any evaluation elements. The marketing communication is prepared without considering the client’s needs, his individual financial situation and does not present any investment strategy in any way. The marketing communication does not constitute an offer of sale, offering, subscription, invitation to purchase, advertisement or promotion of any financial instruments. XTB S.A. is not liable for any client’s actions or omissions, in particular for the acquisition or disposal of financial instruments, undertaken on the basis of the information contained in this marketing communication. In the event that the marketing communication contains any information about any results regarding the financial instruments indicated therein, these do not constitute any guarantee or forecast regarding the future results.
