Global Institutional Investors "Frustrated and Angry" Over Launch of Xi Jinping's Third Term

Chinese President Xi Jinping waves his hand after introducing the Standing Committee members at a press conference of the newly appointed Politburo Standing Committee held at the Great Hall of the People in Beijing on the 23rd.
[Image source=Yonhap News]

As China's leadership is filled with loyalists of President Xi Jinping, foreign capital outflows and avoidance sentiment among global institutional investors are spreading.

According to Bloomberg on the 26th, on the first trading day after the announcement of the next top leadership lineup of the Chinese Communist Party, foreign capital outflows from the Chinese mainland stock market on the 24th reached a record high of $2.5 billion (approximately 3.57 trillion KRW) in a single day.

The market capitalization of Chinese companies listed on the U.S. stock market also evaporated by about $93 billion (approximately 133 trillion KRW) on that day. In particular, the market capitalization of the five major Chinese companies, including Alibaba, was estimated to have disappeared by $52.17 billion (approximately 74.6 trillion KRW).

Bloomberg explained that as a result of the stock price plunge, the wealth of China's top billionaires decreased by more than $35 billion (approximately 50.0465 trillion KRW) in just one day.

On the 26th, the Hong Kong Hang Seng Index closed up 1.00%, and the Shanghai Composite Index (+0.78%) and Shenzhen Component Index (+1.79%) on the Chinese mainland also ended higher, showing some recovery, but there are observations that this is likely a simple technical rebound.

In fact, the investment sentiment of major global institutional investors remains harsh. A representative from Wall Street investment bank Bank of America (BoA) told Bloomberg that global institutional investors are "frustrated and angry" about the launch of Xi Jinping's third term.

Mark Mobius, a well-known American investor famous for emerging market investments, also said, "Considering the political changes, the outlook for investing in China is definitely not good," and predicted, "Considering China's political stance and U.S. backlash, there is a possibility of heightened tensions and additional sanctions on the technology sector."

A representative from the French investment bank Soci?t? G?n?rale stated, "(Although we had an 'overweight' opinion on the Chinese stock market this year) we were wrong," analyzing that the Chinese stock market will struggle compared to global stock markets until the 'zero COVID' policy is lifted.