(Bloomberg) — Foreign investors are on track to turn sellers of Chinese equities for the first time ever for the year, as concerns about a lack of supportive policies from the Party congress and a renewed Covid Zero push spook markets.
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Overseas investors sold a record net 17.9 billion yuan ($2.5 billion) of mainland shares via trading links with Hong Kong on Monday, according to Bloomberg data, tipping the year-to-date level into a small net outflow. If that holds through year end, it would be the first annual decline since the stock connect program was launched in 2014.
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Panic selling hit markets on Monday following the nation’s twice-a-decade political event, with the Hang Seng China Enterprises Index tumbling to the lowest level since the 2008 financial crisis. President Xi Jinping’s consolidation of power was seen as a major risk, with expectations that the leadership reshuffle would bring a continuation of key policies like Covid Zero.
“Foreign sentiment on Chinese stocks is low now,” as the party congress signaled no imminent changes to Covid policies, said Marvin Chen, an analyst with Bloomberg Intelligence. “Markets may need to wait to closer to the Central Economic Work Conference in December to see how the new leadership will address China’s economic challenges.”
China bears are growing by the day as traders turn skeptical over the nation’s economic growth due to its Covid-Zero policy and a heavily-battered property sector. The benchmark CSI 300 Index dropped 2.9% on Monday amid the broader selloff despite the nation posting better-than-expected third quarter gross domestic product data.
Investors are now looking ahead to whether the new leadership can deliver much-needed stimulus to stem further losses. Two economic gatherings later this year – the Politburo meeting and the Central Economic Work Conference – will be closely watched for such policies.
–With assistance from April Ma.
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