Alibaba is a Chinese e-commerce giant highly sensitive to consumer spending.
Qilai Shen/BloombergChinese stocks have slumped this week amid fears of a new wave of Covid-19 cases, which would risk growth in the world’s second-largest economy and test the decision to reopen the country after lockdowns induced a slowdown last year.
China faces a Covid-19 variant that has fueled many new cases across the country since late last month, with expectations that infections will continue to rise, Bloomberg reported on Monday, citing local media reports of remarks from a senior health advisor. Expectations are for 40 million infections a week by the end of May, before a peak of 65 million infections a week in June, with authorities scrambling to prepare vaccines to counter the wave, according to the reports.
It would be China’s biggest Covid-19 wave yet, according to World Health Organization data, with the peak of infections during the week of Dec. 19—after the government moved to reopen the country—topping out just above 41 million cases.
A return to lockdowns would be a blow to Chinese stocks—and the global economic picture—after severe restrictions throughout last year weighed heavily on growth.
Shares in Alibaba (ticker: BABA), a Chinese e-commerce giant highly sensitive to consumer spending, shed nearly 1% in U.S. premarket trading on Thursday, having already declined 10.5% over the five days to Wednesday’s close.
JD.com (JD), another e-commerce group, saw its stock drop 1.5% in the premarket, extending declines after an 8.5% slide in the five days to Wednesday’s close.
Hong Kong’s Hang Seng Index tumbled 1.9%, seeing its third straight day of declines and its worst three-day losing streak in more than two months.
The yuan, too, has weakened, losing 0.1% on Thursday to bring declines across the last month to near 2.1%.
“The yuan, along with weakness in industrial metals, have been signaling continuing vulnerability in the Chinese economy,” said Quincy Krosby, the chief global strategist for LPL Financial. “Now authorities are facing a deeper slowdown as expectations rise for another significant outbreak of Covid … without a sustainable blueprint underpinned by fiscal stimulus measures, economic growth could be thwarted by the country’s underlying problems.”
Write to Jack Denton at jack.denton@barrons.com
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