The decline in Chinese shares has now spread to the bond and currency markets as Beijing’s continuous regulatory clampdown sparks rumors about U.S. funds ditching China and Hong Kong assets.
The rumors also include the possibility of retaliation from authorities in the US that could restrict investments in China and Hong Kong. This spread among traders in Asia, causing an increased sell-off rate.
The Hang Seng Tech Index, an index comprising of several Hong Kong-listed Chinese stocks, fell up to 10%. Traders also ditched Chinese bonds, while the yuan fell against the dollar to its lowest since April.
Based on these trends, it is obvious that investor confidence is greatly hit by the persistent regulatory restrictions being imposed by Beijing, as part of efforts to keep big tech under control and narrow the wealth gap. Investors fear that the most recent crackdown on the education, food delivery, and real estate sectors will spread to other critical sectors.
“The spread of declines from the Chinese equities space into the yuan signals that the concerns over regulatory risk in China might have taken a turn for the worst,” said FX strategist Terence Wu.
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