China’s protests over the strict Covid 19 restrictions soured over the weekend leading to sharply lower stock indices on Monday.
Over the last three days, students staged protests at many universities, while people took to the streets in parts of Beijing, Shanghai, Wuhan, and Lanzhou, among other cities.
Shanghai Composite briefly fell 2.2%, before trimming losses to 0.9% lower than Friday’s close. The tech-heavy Shenzhen Component Index dropped 1.1%.
Hong Kong’s Hang Seng (HSI) Index fell as much as 4.2% in early trading. It has since pared some losses and last traded 2% lower. The Hang Seng (HSI) China Enterprises Index, a key index that tracks the performance of mainland Chinese companies listed in Hong Kong, lost 2%.
The onshore yuan, which trades in the tightly controlled domestic market, briefly weakened 0.9%.
Oil prices also dropped sharply with US crude futures falling to 2.7% to trade at $74.19 a barrel and Brent crude, the global oil benchmark, lost 2.6% to $81.5 per barrel.
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According to a research report released on Monday by analysts from Nomura, China’s central bank cutting the amount of cash that lenders must hold in reserve for the second time this year is not a solution to the economic woes, and the government should instead focus on controlling the pandemic.
“Cutting the RRR now is just like pushing on a string, as we believe the real hurdle for the economy is the pandemic rather than insufficient loanable funds,”
“In our view, ending the pandemic [measures] as soon as possible is the key to the recovery in credit demand and economic growth,” they said in the report.