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The CSI 300 Index, which tracks the most extensive stocks on the mainland, dropped by 3.09% to 4,100.07.
On Monday, the Asia-Pacific markets recorded some losses, led by Chinese stocks. This came about due to investors’ reactions triggered by the March inflation data for China and the disheartening coronavirus situation in the country. Even though federal governments are easing Covid restrictions in some parts of the world, China still suffers from an unprecedented health crisis.
Over the weekend, the Southern city of Guangzhou suspended physical classes across all elementary and middle schools. As the pandemic persists and more cases are recorded, the city has now shifted to online courses. Additionally, municipal authorities ordered only necessary traveling outside the city would be allowed. And for that, there is a requirement of a negative virus test which must be valid within the last 38 hours. According to the National Health Commission, there is a significant increase in Covid-19 cases, up from the 11 cases per day that were seen before now.
Also, Shanghai reported an alarming record high of cases on the 10th of April. There were 914 cases with symptoms and 25,173 asymptomatic victims. Currently, Shanghai is locked down, and people have resorted to home deliveries for their necessities. Ahead of Guangzhou. Shanghai has moved to online learning for its elementary and middle schools since the 13th of March.
Chinese Stocks Dropped Over 3% with Surging China’s Producer Inflation
With recent happenings, Chinese mainland stocks, including Hong Kong, have been choppy. The CSI 300 Index, which tracks the most extensive stocks on the mainland, dropped by 3.09% to 4,100.07. At the same time, the Shanghai composite fell 2.61% to around 3,167.13 while the Shenzhen component plunged 3,671% to 11,520.21.
Chinese EV maker Nio (NYSE: NIO) has also placed a hold on production due to the Covid outbreak, which has disturbed its supply chain partners. Following the announcement, the company lost over 7%, and it currently is down 8.05% in pre-market trading.
A portfolio manager at Vontobel Asset Management Ramiz Chelat commented:
“The more notable fact is the big gap between [China’s consumer price index] and [producer price index], and that indicates that pricing power amongst most companies in China is weak and they’re taking a hit on margins.”
In addition to declining Chinese stocks, producer inflation in March was higher than expected. China’s producer price index climbed 8.3% compared to the previous year. Also, the price index is a 7.9% increase over expectations. At the same time, Chinese consumer inflation grew 1.2% above March’s expectation. Additionally, the price index increased 1.5% year on year.
Similarly, the US stock futures plunged earlier today, causing a market stir. As it stands, global investors await the US consumer price index March reading on the 12th of April and the producer price index on the 13th. The outcome will determine how the Federal Reserve will move to control inflation.