Hong Stocks Sag 6% Over Xi's Iron-Fisted Rule

Hong Kong stocks had their worst day since the 2008 global financial crisis, just a day after Chinese leader Xi Jinping secured his iron grip on power at a major political gathering, Laura He reported for CNN Business late on Oct. 24, 2022.

Photo Insert: Hong Kong’s benchmark Hang Seng Index plunged 6.4% on Monday, marking its biggest daily drop since November 2008.

Foreign investors spooked by the outcome of the Communist Party’s leadership reshuffle dumped Chinese equities and the yuan despite the release of stronger-than-expected GDP data.

They’re worried that Xi’s tightening grip on power will lead to the continuation of Beijing’s existing policies and further dent the economy.

Many were also appalled by the treatment of former Chinese president Hu Jintao, who was kicked out of the 20th Party Congress just he was about to purportedly call for the impeachment of Xi Jinping.

Hong Kong’s benchmark Hang Seng Index plunged 6.4% on Monday, marking its biggest daily drop since November 2008. The index closed at its lowest level since April 2009. The Chinese yuan weakened sharply, hitting a fresh 14-year low against the US dollar on the onshore market.

On the offshore market, where it can trade more freely, the currency tumbled 0.8%, hovering near its weakest level on record, even as the Chinese economy grew 3.9% in the third quarter from a year ago, according to the National Bureau of Statistics (NBS.) Economists polled by Reuters had expected growth of 3.4%.

The sharp sell-off came one day after the ruling Communist Party unveiled its new leadership for the next five years. In addition to securing an unprecedented third term as party chief, Xi packed his new leadership team with staunch loyalists.

A number of senior officials who have backed market reforms and opening up the economy were missing from the new top team, stirring concerns about the future direction of the country and its relations with the US.

Those pushed aside included Premier Li Keqiang, Vice Premier Liu He, and central bank governor Yi Gang.

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