(Reformulates, adds market comments and updates prices)
By Xie Yu and Summer Zhen
HONG KONG, Oct 24 (Reuters) – Hong Kong stocks fell to 13-year lows on Monday and the national yuan fell to its weakest level in 15 years after Xi Jinping’s newly unveiled leadership team raised fears. that economic growth is sacrificed for interests driven by ideology. policies
The Hang Seng Index fell 5% in the early afternoon, touching levels last seen during the 2008-2009 global financial crisis.
Shares of Hong Kong-listed tech giants Alibaba Group Holding Ltd and Tencent Holdings Ltd tumbled 10% and 8% respectively, dragging the Hang Seng tech index down 7% to a record low. Hong Kong-listed Chinese developers plunged 9% to record lows.
Both the real estate and tech sectors have come under much greater regulation under Xi.
Xi secured an unprecedented third leadership term on Sunday and unveiled the new Politburo Standing Committee packed with loyalists.
The appointments “show China moving from economic pragmatism to political ideology,” said Ales Koutny, emerging markets portfolio manager at Janus Henderson Investors.
“The message here is clear: COVID Zero lockdowns, shared prosperity agenda and sectoral crackdowns are going nowhere,” he said, adding that he believed these risks would limit China’s annual economic growth to just 2- 3%.
China’s gross domestic product (GDP) rose 3.9% year-on-year in the July-September quarter, official data showed on Monday, rebounding at a faster-than-expected pace, but that was not enough to buoy investors. .
The equity declines were more muted for mainland Chinese markets, which are less vulnerable to overseas selling, and were fueled by a rise in China defense-related stocks as investors bet they geopolitical tensions will intensify, particularly over Taiwan.
China’s CSI300 bluechip index lost 2.3%, while the Shanghai Composite Index lost 1.4%.
The onshore yuan fell to its weakest level in 15 years. The offshore yuan, in which trading began from 2011, fell as low as 7.2790 per dollar, near its all-time low.
The cross-border Stock Connect between China and Hong Kong saw a net outflow of about 9.2 billion yuan ($1.3 billion) on Monday morning.
“The short-term negative factor remains China’s extremely harsh COVID policies, which have affected foreign investors’ confidence in China,” said Yuan Yuwei, a fund manager at hedge fund house Water Wisdom Asset Management.
Devastated by China’s zero-COVID policy, which seeks to end all outbreaks and has resulted in frequent lockdowns, sectors such as tourism, leisure, and hotels and restaurants saw sharp declines.
During the 20th Communist Party Congress, Xi reaffirmed his push for Common Prosperity, vowing to distribute income more fairly and “standardize wealth accumulation mechanisms.”
He also emphasized national security, saying China must secure supply chains, sufficient grain and energy, as well as work toward technological self-sufficiency.
An amendment to the Communist Party’s constitution enshrined “develop fighting spirit, strengthen fighting ability,” while also including for the first time a call to oppose and deter forces seeking Taiwan independence.
As investors abandoned Internet companies and real estate developers, some of those funds redirected to chipmakers, high-end equipment producers and defense stocks.
Minyue Liu, Greater China investment specialist at BNP Paribas Asset Management, said her portfolio has reduced its exposure to stocks vulnerable to rising geopolitical risks, favoring instead stocks related to technological innovation, industrial upgrading and the energy transition.
Some investors are less pessimistic, arguing that China’s new leadership team is well aware of the importance of economic growth.
“I think there is a growing consensus among policymakers that making the economic pie bigger, through quality growth, should be a priority,” said Mark Dong, general manager of Minority Asset Management (Hong Kong). kong).
($1 = 7.2535 Chinese yuan) (Shanghai and Hong Kong Newsroom Report; Editing by Edwina Gibbs)
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