Chinese shares bucked the optimism seen in Asian markets on Monday, with investors concerned both about short-term Covid lockdowns and the longer-term trends under China's new leadership team.
The CSI 300 index of the largest listings in Shanghai and Shenzhen fell another 0.9% Monday, on a generally positive day of trading in Asia. Chinese shares have now lost 6.3% since the end of a major Chinese Communist Party conference last weekend. European and U.S. stocks have risen in that timeframe.
In Japan, the Bank of Japan's decision from Friday to stand firm on its current easy monetary policy helped propel the Topix 1.6% higher Monday. That means Japanese shares are down only 5.0% this year.
In China, the poor post-conference performance has helped drive the CSI 300 index down 28.7% year-to-date, a full 10 percentage points worse than the showing of the S&P 500.
Investors are worried about images out of China on Twitter that posters say show workers scaling the barbed-wire security fence to escape the Apple (AAPL) supplier Foxconn's factory in Zhengzhou. Taiwan-based Foxconn says its factory is the world's largest smartphone production base, with almost 300,000 workers across three campuses in Zhengzhou, the capital of central Henan Province.
The company said on Sunday that it would not stop employees leaving. But city officials warn that workers should be traveling "point to point" in specially arranged vehicles, and be quarantined in isolation facilities on arrival. The workers are presumably trying to escape that confinement. Full name Hon Hai Precision Industry (HNHPF) (TW:2317) Foxconn shares dipped 1.4% on Monday in Taipei.
The selling of Chinese shares has been sustained since the end of the 20th National Congress, with investors concerned that President Xi Jinping has stacked the country's top leadership with yes-men. As I explained in greater detail last week, Xi forced the few ministers with hands-on experience running the economy into early retirement.
Meanwhile, a storm is brewing here in Hong Kong, both literally and figuratively. I've been outside to turn over flower pots and chairs and secure items that are already starting to blow around.
The Hang Seng Index fell 1.2% Monday, taking its losses in 2022 to an eye-watering 36.9%. Controversy is swirling around a conference designed to show that "Hong Kong is back," even while it struggles to make sure top officials heed its strict Covid rules.
Tropical Storm Nalgae is heading this way after pounding the southern Philippines, with flooding and landslides killing 98 mainly on the island of Mindanao.
Hong Kong has therefore currently hoisted the "T3" typhoon signal. Strong winds and swell should continue through Tuesday. The Hong Kong Observatory does not foresee that it will need to raise the T8 signal, the point at which businesses and schools start closing their doors and hunkering down.
The Observatory cautioned that the storm will be closest to the city later on Wednesday and early Thursday. Nalgae is expected to weaken, but has already proved unpredictable in severity and the direction it takes.
Three top bankers have now pulled out of the high-profile financial summit being held in Hong Kong this week. U.S. lawmakers have started to question the wisdom of participating in a conference that's essentially designed to be a propaganda tool for a repressive government.
Blackstone (BLK) President Jonathan Gray will now not attend this week's event, after he contracted Covid-19. CFO Michael Chae will attend in his stead.
Citigroup (C) CEO Jane Fraser has also pulled out, also blaming a case of Covid. Like Gray, Fraser was due to participate up on stage in a panel at the event.
Barclays (BCS) CEO C.S. Venkatakrishnan has cancelled plans for an Asia spin this week. He will now not make that trip.
To top matters off, Hong Kong's financial secretary, Paul Chan Mo-po, contracted Covid last week while on a trip to Saudi Arabia to drum up investment. He delivered a video address today to a fintech week that kicked off in Hong Kong. But Chan has pledged to do his best to attend the financial summit, with the government claiming he tested negative on a RAT test and will return to Hong Kong on Tuesday.
Hong Kong's equivalent of a central bank, the Hong Kong Monetary Authority, is hosting the event from Nov. 1-3. The Global Financial Leaders' Investment Summit is due to start with a gala dinner Tuesday night at the newly opened M+ museum. That's followed by two days of conference sessions and events, on Wednesday and Thursday.
Chan's ability to enter public venues should be impinged by his need to serve three days of self-observation on his return. His health code on his phone should be amber rather than the blue necessary to enter restaurants and most public places.
Sanctioned Hong Kong Chief Executive John Lee Ka-chiu is due to open the summit with a keynote address. But Lee, a former high-ranking cop and minister for security, was sanctioned by the U.S. government in 2020 for his part in suppressing Hong Kong's civic freedoms and implementing the brutal National Security Law imposed on the city by Beijing.
The sanctions mean that neither U.S. companies nor U.S. individuals should do business with the target, whether through money, goods or services. Despite that provision, a roster of bigwigs from Wall Street i,ncluding the chiefs of Apollo Global Management (APO) , BlackRock, the Carlyle Group (CG) , Goldman Sachs (GS) , JPMorgan Chase (JPM) , KKR (KKR) and Morgan Stanley (MS) are due to take part.
Chan, the finance secretary, is due to give a lunchtime keynote address on Wednesday, as well as make the opening speech on Thursday. People who test positive for Covid in Hong Kong are whisked away to mandatory quarantine in a government facility for a week.
But Hong Kong has eased its rules to allow the conference to happen. While the banking fat cats won't be allowed in restaurants or bars unless they've served the three-day supervision period, they will be allowed to socialize within the "bubble" of the conference, including attending the dinner at M+.
Hong Kong essentially adjusted its Covid rules, scrapping mandatory hotel quarantine for all arrivals, so that the conference and other big events can occur. The Hong Kong Sevens rugby tournament is due to start on Friday and run through Sunday, causing many Western executives to schedule a "business trip" to the city for this week that conveniently also means they can attend the rugby tournament this weekend.
It is the first time the rugby and major conferences have taken place in the city since pro-democracy demonstrations swept the city in 2019. Fiji made it five wins in a row when they won the last Rugby Sevens, held in April 2019.
One very bright spot in Hong Kong trade came in the form of BYD (BYDDY) (HK:1211). The electric carmaker backed by Warren Buffett on Friday posted a Q3 profit that was up 350%.
BYD, China's top-selling electric carmaker, is looking to push into European markets. Its shares rose 6.0% on Monday, the strongest showing in the Hang Seng Index, with electronics-component spinoff BYD Electronic (BYDIY) (HK:0285) up 13.4%, the biggest gains in the Hang Seng Tech Index.