China’s Stocks, Yuan Trading Dwindle Amid Shanghai Lockdown
(Bloomberg) -- Trading volumes in China's stocks and currency markets slumped after Shanghai announced a lockdown aimed at curbing a raging Covid-19 outbreak in the city.
The yuan's average trading volume in five sessions to Tuesday plunged to the lowest since 2020. Activity in the equity market over that period also dropped 15% below the daily average this month. Some small- and medium-sized banks in Shanghai have almost halted business without an emergency backstop, traders familiar with the matter said.
The drop in trading highlights risks to the financial system stemming from Beijing's zero-Covid policy. Shanghai on Saturday announced a two-phased lockdown in the city of 25 million people, which includes its financial district and industrial parks, for four days. That prompted banks brokerages and financial institutions to ask its staff to stay in office for days, with some even offering additional cash incentives to comply.
A five-day moving average of onshore yuan trading fell to $25.4 billion as of Tuesday, Bloomberg calculations show based on data from the China Foreign Exchange Trade System. Some smaller foreign banks are unable to support real-time foreign-exchange transactions from home properly, said traders who aren't authorized to speak publicly.
China's stock market experienced one of its most volatile periods in decades this month, with record plunges followed by dizzying rallies after Beijing made a sweeping set of promises to stabilize equities. Equity trading volumes have also come down after pledges from regulators slowed down panic selling.
The lockdown “has an impact on capital market operations in the short term but it will unlikely be a major concern for policy makers,” said Peiqian Liu economist at NatWest Markets.
READ: Trading Floors Fill With Sleeping Bags in Shanghai Lockdown
©2022 Bloomberg L.P.
With assistance from Bloomberg
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