Asia markets struggle as China Covid-19 worries build

Hong Kong – Growing fears about

China’s latest Covid-19 outbreaks

on Tuesday rattled investors, who fear the authorities will revert to highly restrictive containment measures that have already dealt a chilling blow to the world’s No. 2 economy this year.

After starting November with a rally, thanks to easing inflation concerns and signs that China was edging towards a looser approach to the disease, the optimism has been given a massive jolt since the country announced its first virus deaths in six months.

These come as infections rise across the country, with residents in Beijing worried that leaders will

introduce lockdown measures

similar to those seen earlier in the year in Shanghai, which lasted for months.

The flare-ups come just a week after China said it will begin

rolling back some of the strict Covid-19 rules

that have been in place since the pandemic started in 2020, even as the rest of the world has moved on.

Analysts said the latest developments highlight the long road ahead for China in emerging from the crisis as President Xi Jinping sticks solidly to a zero-Covid-19 strategy that is widely blamed for the country’s economic troubles.

“Risk sentiment has been under pressure on questions around China reopening,” said SPI Asset Management managing partner Stephen Innes.

“Some investors are convinced that China’s reopening is a formality and will be catalysed by the (World Health Organisation) downgrading Covid-19 to an endemic. We know that China’s reopening will be laced with fits and starts as the two-steps-forward-one-step-back routine becomes the norm.”

Japan’s Nikkei index was up 0.7 per cent at the midday break. Hong Kong, which thundered more than 10 per cent higher in a three-day surge earlier this month, fell for a fifth straight day, retreating 0.8 per cent, while the Shanghai Composite Index was flat.

Still, there were gains in Tokyo, Sydney, Manila and Jakarta. Singapore’s Straits Times Index rose 0.6 per cent as at 11.10am local time.

This came after a drop on Wall Street, where trading is lighter than usual owing to the Thanksgiving break at the end of the week.

Wednesday sees the release of minutes from the Federal Reserve’s most recent policy meeting, which will be pored over for insight into officials’ thinking against the backdrop of four-decade-high inflation and signs of a slowing economy.

Hopes that the United States central bank will begin to take its foot off the pedal were boosted earlier this month by figures showing that inflation slowed more than expected, suggesting the hikes were beginning to bite.

Still, several members of the Fed’s top brass have warned against getting carried away and said more increases were needed to get on top of prices.

But JPMorgan Chase strategist Marko Kolanovic said markets will likely stumble into the new year and only pick up once the US central bank takes a more dovish stance on borrowing costs. JPMorgan sees risk assets trading “range-bound with a more pronounced downside risk”. AFP