Top Stocks Shed Nearly $70 Billion In U.S. As Xi’s Third Term Puts Market On Edge

Topline

Shares of the largest Chinese companies listed on U.S. exchanges tanked by as much as 25% Monday after Chinese President Xi Jinping secured an unprecedented third term, as losses to the tune of over $1 trillion continue to mount for the firms.

Key Facts

The ten biggest New York-listed Chinese companies lost a total of $67.7 billion in market capitalization, with each firm falling by 8% or more, led by the two largest firms—online retailer Alibaba and technology company Pinduoduo—facing 13% and 25% losses, respectively.

The decline extended throughout the more than 200 U.S.-listed Chinese firms, with the weighted Nasdaq Golden Dragon China Index falling 14.4% Monday.

Losses were felt in China as well, as the Hang Seng China Enterprises Index, which measures Hong Kong-listed Chinese stocks, fell 6.4% Monday, and the Chinese yuan rose 1.3% to 7.32% against the dollar in offshore trading, its cheapest level since tracking began in 2010.

Big Number

75%. That’s how much the U.S. market cap of the ten largest Chinese firms is down from their $1.6 trillion peak in February 2021, sitting at $401 billion Monday.

Crucial Quote

“While Chinese politics have long been opaque, this sharp consolidation of power is adding to investor unease,” Mark Haefele, global chief investment officer at UBS, wrote in a Monday note to clients.

Key Background

Xi retaining power over China and its ruling Communist Party over the weekend was “heavily expected,” but it still “hardly impressed financial markets,” OANDA analyst Edward Moya wrote Monday, and investors remain anxious about his government’s hawkish regulation of corporations and stringent Covid policies. The Nasdaq Golden Dragon China Index hit its lowest level since 2013 Monday and is down nearly 80% since last spring. Chinese stocks listed stateside exploded in value early in the pandemic, but a flurry of headwinds, including escalating political tension between Washington and Beijing, Covid lockdowns far stricter than most other countries and crackdowns on industry, have since brought stocks tumbling back to earth. Several major Chinese companies announced plans earlier this year to delist their stocks from New York exchanges as the firms refused to comply with American auditing requirements, but backed off the delisting plans in August after the U.S. and China came to terms on an agreement to provide regulators with additional accounting information.

Surprising Fact

Jack Ma, Alibaba’s billionaire cofounder and largest shareholder, lost $900 million Monday, sending his net worth down to $20.5 billion, according to our calculations. Ma’s fortune is less than half of what it was in early 2021.

Further Reading

Xi Jinping’s Power Grab Spooks China Investors (Forbes)