China’s stocks, yuan tumble on protests

SHANGHAI (Reuters) — 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.

A U.S. crackdown on Chinese tech giants citing national security concerns also weighed on shares of tech firms.

China’s blue-chip CSI 300 Index fell 1.6 percent by the end of the morning session, after slumping as much as 2.7 percent earlier in the day, on track for its worst day in a month. Hong Kong’s Hang Seng Index lost 2 percent.

Amid the worries, stock investors took little cheer from a central bank decision on Friday to cut banks’ required reserve ratio (RRR) in a bid to aid the struggling economy. The widely expected RRR cut did however add downward pressure on the Chinese currency.

The onshore yuan weakened as much as 1.1 percent to 7.2435 per dollar at one point, the softest level since Nov. 10, and was trading at around 7.2 at midday.

“The social unrest in China has fueled 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 zeroCOVID policy as well as record high daily infections.

While 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 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.

Most sectors in mainland markets dropped, with shares in financials, healthcare and energy down roughly 2 percent each.

Shares in Chinese surveillance equipment maker Dahua Technology, video surveillance firm Hangzhou Hikvision Digital Technology and telecoms firm Hytera Communications dropped, following a sales ban by the Biden Administration.

Bucking the trend, transport and tourism-related companies rose, as some investors bet recent COVID flare-ups and social unrest might push China to end its zero-COVID policy earlier.

A tourism subindex jumped more than 3 percent, while stocks in Spring Airlines surged 4.6 percent, and UTour Group jumped more than 7 percent.