[Asia Economy New York=Special Correspondent Joselgina] Following the confirmation of Xi Jinping's third term as China's President, Chinese stocks listed on the New York Stock Exchange plunged sharply on the 24th (local time). Analysts say that with the establishment of an almost absolute power system, investment uncertainties have increased, especially due to anticipated regulatory tightening centered on the technology sector.
According to CNBC, the Invesco Golden Dragon China ETF (PGJ), which tracks Chinese stocks listed in the U.S., plummeted more than 20% compared to the previous session, hitting a 52-week low.
By individual stocks, as the New York market approached the afternoon close, Alibaba was trading down 13%, Pinduoduo fell more than 24%, Li Auto dropped over 19%, NIO declined more than 15%, and Tencent also slipped over 3%.
This follows the 20th National Congress of the Communist Party of China (CPC) confirming Xi's third term, and the subsequent first plenary session of the 20th CPC Central Committee, where the Politburo Standing Committee?the highest leadership body?was filled exclusively with Xi's closest allies, effectively establishing an absolute power system. Investors, fearing regulatory backlash from the authoritarian regime, have collectively started selling off Chinese stocks.
Sun Xun, Associate Professor at King's College London, told CNBC, "The likelihood of Xi Jinping's policies, which have focused on prioritizing the public sector at the expense of the private sector over the past few years, changing or being revised has diminished." In recent years, Xi has strengthened regulations in the technology sector and maintained a strict zero-COVID policy that suppresses the private economy, including in Shanghai, a major financial hub.
Mark Shilski of Bernstein noted in an investor memo that "stocks based on the world's second-largest economy are no longer investable." Goldman Sachs also forecasted that unless there is clarity on easing the zero-COVID policy, stabilizing the real estate market, and easing U.S.-China tensions, valuation improvements in the Chinese market will be difficult.
Meanwhile, the Hong Kong Hang Seng Index closed down 6.36% at 15,180.69, marking its lowest level since April 2009, CNBC reported.
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