China’s markets took the news of mega-city Chengdu’s lockdown in their stride as market participants expect any economic hit will be much less significant than seen in the Shanghai shutdown.
(Bloomberg) — China’s markets took the news of mega-city Chengdu’s lockdown in their stride as market participants expect any economic hit will be much less significant than seen in the Shanghai shutdown.
The CSI 300 Index has lost 1.4% since Thursday when the southwestern city of 21 million announced the sudden restrictions. That is much less than the 2.7% drop in the Asian regional benchmark. The onshore yuan fell 0.2% and China’s 10-year government bond yield was little changed.
The muted response comes partially from a growing sense of fatigue toward news of movement restrictions after Shanghai’s painful two-month lockdown earlier this year. Though that battered sentiment in April and triggered panic-selling in markets, mainland stocks seem to have largely priced in the challenges that come with China’s Covid zero policy.
The CSI 300 Index has fallen about 30% from a peak in February last year, much worse than the 10% decline in the MSCI All-Country World Index during the period.
Read: Chengdu Fears Shanghai Repeat as Cities Fall to Xi’s Covid Zero
“Many are also becoming numb to news of lockdowns as we come closer to accepting the reality that virus controls will increasingly be part of daily life,” said Chengdu-based Yang Wei, a fund manager at Longwin Investment Management Co.
Increasing expectations of interventionary measures to ensure market stability over the coming weeks in the lead-up to China’s party congress in October may also explain why selling pressure isn’t strong, he said.
To be sure, the commodities market took a toll with oil, copper to iron ore sinking after the Chengdu lockdown news. Constraints on travel, construction and manufacturing are expected to hit consumption of gasoline, diesel, copper and aluminum used in everything from car bodies to window frames.
Chengdu is home to less than 100 firms listed in Shanghai and Shenzhen, with solar giant Tongwei Co. and Tianqi Lithium Corp. among the largest. The majority have market caps of less than 20 billion yuan ($2.9 billion). In comparison, of the companies listed on China’s two largest exchanges, more than 300 are headquartered in Shanghai, including around a dozen with valuations larger than 100 billion yuan.
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