Asian markets gear up for a hit as unrest in China drags sentiment

 

Asian markets open on news of China unrest due to COVID restrictions, investors brace themselves for negative market reaction

Investors are preparing to take the plunge as markets in Asia opened on Monday amid reports of growing unrest in China over Covid restrictions.

Protests spread across the country on Sunday as citizens took to the streets and university campuses, venting their anger and frustration at local authorities and the Communist Party. Heavy police forces were present in some areas where large crowds gathered in Shanghai, and demonstrations were also reported in the capital, Beijing.

The yuan fell, the Australian dollar led commodity currencies and the greenback strengthened against most major peers as unrest cast a shadow on risk sentiment. The stock markets of South Korea, Japan and Australia opened with losses.

Here's what analysts said about the market implications for Asia:

risk pricing

"We may see some volatility around the Chinese markets," said Chris Weston, head of research at Pepperstone Group Ltd. The outlook for China in the longer term remains relatively strong, he said.

sell it

"Anything exposed to China is probably going to be weak here - we haven't seen the government reaction yet," said Jessica Amir, market strategist at Saxo Capital Markets in Sydney. "Either way, further earnings of Chinese exposed companies will be in question and investors will probably express this by selling."

"The expectation is that this fuels concerns and triggers a sell-off across the sector, although we've seen this before so it's not too material," said Karen Zoritsma, head of Australian equities at RBC Capital Markets. "I think that's the big issue." What does this mean for supply chains and corporates in the long run?"

disappointed investors

"Markets will react negatively to widespread protests and rising case numbers, which are likely to trigger new supply-chain disruptions and lower consumption demand, at least in the short term," said Gabriel Wildau, managing director at Tenno Holdings LLC in New York. Is." “Investors themselves perhaps share some of the frustration of the protesters. Both groups had hoped – perhaps wrongly – that the '20 measures' signaled a more decisive policy shift away from zero-Covid and that local authorities could now Disappointed to see working hard. Lockdown."

weak currency

"The worsening COVID situation in China should weaken the AUD and CNH," strategists at Commonwealth Bank of Australia Ltd, including Joseph Capurso, wrote in a note. Told.

catalyst for change

"The Chinese onshore equity market may interpret public opposition as another catalyst for change and thus view it favorably," said Jason Hsu, chief investment officer at Reliant Global Advisors. He said that the market has already put a price on the harsh Covid policy.