Chinese companies listed in the United States saw a wave of declines on Tuesday (October 8), amid economic difficulties in China. The National Development and Reform Commission (NDRC) of the Chinese Communist Party (CCP) held a press conference on the same day but failed to provide the market with hope of a recovery. In response, the Hong Kong stock market tumbled, marking its worst single-day performance since 2008.
Alibaba’s American Depositary Receipts (ADRs) fell by about 8% in pre-market trading, while JD.com and Pinduoduo dropped by 10.9% and 10.6%, respectively.
During the press conference, NDRC Director Zheng Shanjie set China’s annual economic growth target at around 5%. However, he also acknowledged that the current economic situation is challenging, with the global environment becoming increasingly “complex and extreme.” Despite this, specific measures to address these challenges were not clearly articulated, leaving investors disappointed.
According to reports by Reuters, Christopher Peters, the trading floor manager at London’s Accendo Markets, commented that the Chinese government’s morning briefing did not appear to offer investors any new stimulating measures. This lack of clarity may raise doubts about the ability to control China’s real estate problems.
Stock prices of European luxury goods companies and Chinese risk assets such as commodities experienced sharp declines on that day. Last month, following the launch of a series of economic stimulus measures in Beijing to boost the economy, these assets and the stocks of Chinese companies listed domestically and in the United States had temporarily risen.
Alicia Garcia Herrero, Chief Economist for Asia Pacific at Natixis SA, expressed concerns over the government’s delays in providing clear information. She emphasized the risks associated with stimulus measures that lack fiscal support and rely solely on monetary policy to prop up stocks and other assets.
The negative sentiment spread to the U.S. market, with Chinese electric vehicle maker NIO’s stock falling by 10.6%, gaming company Bilibili dropping by 15.7%, and Baidu declining by 9.1%.
The iShares MSCI China ETF plunged by 12.9%, while the technology-focused KraneShares CSI China Internet ETF dropped by 12.1%.
Other industries related to China also faced pressure. One of the world’s largest copper producers, Freeport-McMoRan, saw its stock price slide by 4.1%, while luxury brand Estee Lauder dropped by 3.5%.
Market analysis by Bloomberg indicates that the market reaction reflects concerns that the CCP’s goal of achieving approximately 5% annual economic growth may not be sufficient to pull China’s economy out of the deflationary spiral, potentially leading to greater economic pain in the coming years.
During the NDRC’s press conference, the Hong Kong stock market experienced a sharp decline, with the Hang Seng Index dropping by over 2,300 points at one point, marking its worst single-day performance since 2008.