Chinese stocks slumped on Monday as recent monetary easing measures failed to offset investor worries about protests against strict COVID-19 curbs in the world’s second-largest economy, while the yuan weakened versus the dollar.
Also, a U.S. crackdown on Chinese tech giants citing national security concerns weighed on shares of tech firms.
China’s blue-chip CSI 300 Index fell as much as 2.7% in early trade, on track for its worst day in a month. Hong Kong’s Hang Seng Index plunged as much as 4.2%.
Investors shrugged off the central bank’s announcement on Friday on cutting banks’ required reserve ratio (RRR) to aid a struggling economy. The move had been widely expected and added downward pressure on the yuan currency.
The onshore yuan weakened as much as 1.1% to 7.2435 per dollar at one point, the softest level since Nov. 10. It last traded at 7.2004 around midday.
“The social unrest in China has fuelled concerns over the social instability in the country and that the road to reopening could be a bumpy one,” said Ken Cheung, chief Asian FX strategist at Mizuho Bank in Hong Kong.
The wave of civil disobedience is unprecedented in mainland China since President Xi Jinping assumed power a decade ago and comes amid mounting frustration over his signature zero-COVID policy as well as record high daily infections.
Although state media has not reported the protests, photos and videos of the protests circulated on social media.
Meanwhile, daily new COVID cases in China reached a record high, with more than 40,000 new infections being reported for Sunday, prompting widespread lockdowns and other curbs on movement and business across the country.
In fresh evidence of the hit to China’s economy from COVID, data on Sunday showed Chinese industrial firms’ overall profits declined further in the January-October period.
Shares fell across the board in mainland markets, with sectors from consumer staples and financials to non-ferrous metal down as much as 3% each.
Shares in Chinese surveillance equipment maker Dahua Technology Co, video surveillance firm Hangzhou Hikvision Digital Technology Co Ltd and telecoms firm Hytera Communications Corp Ltd dropped, following a sales ban by the Biden Administration.
Hong Kong-listed tech giants and real estate developers led the decline, with the Hang Seng Tech Index down roughly 2% and the Hang Seng Mainland Properties Index slumping more than 4%.