China COVID crisis keeps markets on the backfoot

It has been a rocky start to Tuesday in equity markets in ASPAC equities. This is on the heels of the S&P 500 that ended below 4,000 for the first time since late March 2021 while the Nasdaq dropped more than 4% on Monday in a selloff led by mega-cap growth shares.

Investors have grown more concerned about rising interest rates as well as China's stringent zero-Covid policy that has clouded the outlook for its US$9.6 trillion stock market. China’s Vice Premier Liu He has reaffirmed China's Covid Zero policy on Tuesday. 

The South China Morning post reported on May 9 that the Politburo Standing Committee, Beijing's highest decision-making body, at a ­meeting last Thursday struck a surprisingly harsh tone to defend the policy, pledging to fight any attempt to "distort, question and dismiss" it.

''The hawkish stance also marks a setback for stock investors who had bet that Beijing would relax the zero-Covid approach to strike a balance between stabilising growth and bringing the pandemic under control.The Shanghai Composite Index has slumped by 17 per cent this year, making it the worst ­performer in Asia, as the lockdowns in Shanghai and 40 other cities heighten jitters over a deepening slowdown.''

With investors juggling so many worries, one place they are looking for safety is in the dollar. The dollar index, which measures the greenback against a basket of currencies, rose to a 20-year high by as much as 0.6%.

• US dollar sits firm below the freshly scored 20-year high