Over the weekend, demonstrations took place in several Chinese cities, in opposition to the "zero Covid" policy applied by the government for almost 3 years. This unusually large-scale protest movement destabilized all the major Asian financial markets. Let's decipher the Asian stock market downturn.
Chinese markets particularly hard hit
After a weekend of protests in several Chinese cities, all Asian stock markets are down this Monday, November 28. Chinese markets were the worst affected: by late morning (local time), the Shenzhen Component Index had fallen by 1.6%, while the Shanghai Composite was down 1.5%.
In Japan, the Nikkei index lost 0.42% due to the large exposure of Japanese multinationals to the Chinese market. This was particularly true of Toyota, which lost 1.1%. The broader Topix index fell by 0.68%.
In Hong Kong, declines by JD.com, Tencent and Alibaba pushed the Hang Seng down by more than 3.5%. The situation is hardly any better in South Korea, with the Kospi index down sharply (-1%). SK Hynix and Samsung Electronics, which are heavily exposed to the Chinese market, lost 2.12% and 1.8% respectively.
The impact of Covid's zero-carbon policy on oil and commodity prices
In addition, containment measures in China, which affected 412 million people last week, are slowing activity, affecting demand for raw materials such as oil and industrial metals.
Nickel, aluminum and copper prices were down on Monday, as was US crude oil, which fell 0.25% to $76.08 a barrel over the weekend.
The disruptions affecting Asian stock markets are also having an impact on European stock markets, which were down slightly at today's opening. In Frankfurt, the Dax was down 0.43%, compared with 0.50% for the FTSE in London, 0.38% for the EuroStoxx 50 index and 0.53% for the CAC 40 in Paris.
Despite the drastic restrictions imposed on residents of Beijing, Shenyang, Shanghai, Guangzhou, Shijiazhuang and Zhengzhou, Covid-19 contamination has reached a record level in China, with over 30,000 new cases reported last Wednesday. This figure is unlikely to be compatible with a rapid relaxation of containment measures.