Shares tumble as China tightens lockdown

New Zealand's share market had another sharp fall on Monday as investors worried the escalating lockdown in China could prompt a recession in the key export market.

Monday, May 9th 2022, 6:16PM

by BusinessDesk

The S&P/NZX 50 Index fell 227 points, or almost 2%, to 11,381.70. Turnover was $153 million.

It was the tightening covid restrictions in Shanghai and Beijing that sent Asian share markets sliding, according to many market watchers.

Reuters reported Shanghai authorities were renewing their efforts to reduce movement in the city and would maintain the restrictions throughout May.

Meanwhile, Beijing has closed many venues, banned dining at restaurants and shut sections of its public transport network, the news agency said.

“The picture from Mainland China is grim, the Shanghai Composite is 2.15% lower, with the CSI 300 slumping by 3.15%, and Hong Kong’s Hang Seng plummeting by 3.8%,” said Oanda analyst, Jeffrey Halley.

Logistics companies were particularly hard hit on the NZX, with the local economy highly leveraged to both imports from and exports to China.

DGL Group took the biggest hit by a wide margin, falling 14.8% to $3.28 as the company continues to be punished for disparaging remarks made by its chief executive about My Food Bag's Nadia Lim.

But other transport stocks also fell: Move Logistics Group dropped 6.3% to $1.20, Freightways fell 4.7% to $11.25, and Mainfreight was down 4.1% at $77.

A2 Milk, which sells infant formula in China, dropped 5.6% to $4.41 and Vista Group declined 5.4% to $1.76 – it has operations in both Shanghai and Beijing.

Adding to the market woes was an expectation that Russian president Vladimir Putin may choose to escalate the war in Ukraine as Russia celebrates its World War II victory day over the next 24 hours.

Most stocks on the local market fell, although a few managed to make gains.

Westpac Banking Corporation rose 3.2% to $27.10 after it reported its core earnings had risen 16% in the first half of its financial year.

Briscoe Group rose 2.1% to $5.90, Oceania Healthcare was up 2% at 99 cents, and stock market operator NZX climbed 1.6% to $1.27.

The NZ dollar dropped with the stock market and was trading at 63.74 US cents at 3pm in Wellington, down from 64.15 cents yesterday.

“Plummeting stock markets in Asia appear to be prompting heavy outflows from Asian currencies today,” Halley said.

BNZ said in a note today that the NZ dollar had fallen for six consecutive weeks and is at a 22-month low.

“Macro forces are overwhelmingly negative and these look to continue. There is a growing chance of a global economic recession, the sort of environment that the NZD struggles against,” the bank wrote.

Tags: Market Close