Stock investors turn to Politburo for surprises as meeting gains significance amid headwinds from China lockdowns
- Onshore stocks languished near a two-year low as investors yearn for a stronger dose of economic stimulus
- Politburo meeting gains more significance after disappointment with the central bank’s go-slow approach in monetary easing
Signs of economic slowdown caused by China’s uncompromising Covid policy have elevated the significance of the Communist Party’s Politburo meeting this week as traders look for a cure to end US$2 trillion stock rout this year.
The monthly meeting, which typically reviews the state of the economy and sets the policy tone and direction for industries, comes into sharper focus amid factory closures and supply-chain disruptions caused by the citywide pandemic lockdown in Shanghai and curbs elsewhere.
Foreign funds have cut their holdings of onshore stocks. More than US$238 billion in market value has evaporated from the MSCI China Index since March 15 when the market hit a five-year low, bringing total losses for the year to US$2.7 trillion, according to Bloomberg data.
“Beijing is clearly worried,” Rory Green, chief China economist at TS Lombard, a London-based research firm, said in a report last week. “State spending needs to do the heavy lifting because Covid outbreaks reduce the demand for credit and the multiplier of stimulus measures.”
The 25-member Politburo, headed by General Secretary Xi Jinping, is the highest decision-making body within the party. Its members, who also serve concurrently in legislative, administrative and military roles, hold big sway on the financial market.
