China’s stock market unfortunately plunged or tumbled recently with fear that the country is in the middle of subordinating economic growth. There is an escalating consideration that the country would put economic growth in the second place for ECM prospects especially after volatility. Meanwhile President Xi Jinping started his unprecedented third term with a major shake-up of the seven-member Politburo Standing Committee. This includes his close allies Wang Yang and reformers Li Keqiang. Based on October 22nd announcement, the market interpreted that this was a victory over ideology not over market-friendly reform. This is because Mr. Xi mentioned regulating the mechanism of wealth accumulation but without any further explanation.
Therefore, there have been many speculations that the government holds on to its private capital and imposes new taxes especially for the rich. An ECM banker argues that they are hoping that there would be positive news at least from the 20th Party Congress meeting, however, there was nothing at all. Thus, the mention of wealth accumulation could also mean that large tech firms would continue to be under severe scrutiny. Plus, they would be unlikely to see potential major deals for the sector in the near future. Meanwhile, when the market opened, Hong Kong stock thumbled at 13-years low.
The index benchmark is Hang Seng Index, which was down 6.4% to 15.180,69 points. Then, the Hang Seng Tech Index jumped 9.7% to a record low which was 2.801,99 points. Further fall was also experienced by China’s CS1300 Index tracking blue-chip companies in Shanghai and Shenzhen listing to 3.633,37 or 29%. Currently, MSCI’s China Index trades in one time book value, it makes the lowest level ever in 20 years.
