China's stock market falls amid Covid restrictions

China is witnessing an uptick in covid cases as it races to impose restrictions and lockdowns to curb the virus. However, its actions are affecting the people and the stock markets.

The Shanghai index (SSEC) has been in decline since March 2022 when covid cases had begun rising once again. The index was recovering and heading upwards till 3rd March when the index saw a marginal decline of 14 points. However, that was the beginning of a downfall as the index fell consistently for a week. The index, which was near 3,500 at the beginning of March, is now near 3,000.

The Hang Seng index is facing worse conditions. The index has been falling since as early as February 2022. Moreover, the entire index is giving signals of a downtrend. In early March, when covid was picking up once again, the index saw a sharp fall and touched a 6-year low of 18235.48. The index saw some relief in the past few days but is still at a 6-year low, closing at 20,638.48.

Lastly, the CSI 300 Index, the index which represents the movements of the top 300 stocks, also often treated as the index for all blue-chip companies in Mainland China(much like the Indian Nifty 50), has also been in decline.

The index has been falling since Mid-December before crashing in March. From 5,083 in December, the index currently closed at 4,013, a decline of around 20% over 4 months.

The government has kept the benchmark lending rates unchanged even after the government's frequent pledges to support a slowing economy.

The reason for such a decline in the markets is the government's strict measures to achieve the "Zero Covid Policy". Under this measure, major cities like Shanghai are being placed under strict lockdowns and confining people to their homes, adversely impacting manufacturing facilities.

Unlike other countries, the Chinese Covid lockdown strategies are extremely stringent including mass testing sites and forceful transfer of Covid patients. Additionally, public places like schools, supermarkets, tourist areas, and malls are off-limits to the people, and with the help of mandatory track-and-trace apps, close contacts are usually identified and quarantined immediately.

The pandemic is worsening in China as the country reported 18,000 new cases on 20th April, bringing up the death count to 17. Scientists believe that highly transmissible strains like Omicron and XE are responsible for the new infections.

Article by Aman Agarwal.

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