bodyType

customContents

entityId

printArticlePageQuery

filter

article

body

urlAlias

articleSectionsContent

articleSeoArticle

articleSourceHeaderArticle

contentSchemaRenderContent

contentSubHeadlineContent

contentHeadlineContent

mainImagePrintArticleArticle

authorBlockPrintArticleArticle

contentSponsorTagContent

articlePianoPaywallContent

scmpYoutubeContent

hooksTrackPageViewArticle

query printArticlePageQuery(
  $entityId: String!
  $customContents: [CustomContentInput]
  $bodyType: BodyFormatTypeEnum
) {
  article(filter: {entityId: $entityId}) {
    entityId
    body(customContents: $customContents, type: $bodyType) {
      json
    }
    urlAlias
    ...articleSectionsContent
    ...articleSeoArticle_3o8td4
    ...articleSourceHeaderArticle
    ...contentSchemaRenderContent
    ...contentSubHeadlineContent
    ...contentHeadlineContent
    ...mainImagePrintArticleArticle
    ...authorBlockPrintArticleArticle
    ...contentSponsorTagContent
    ...articlePianoPaywallContent
    ...scmpYoutubeContent
    ...hooksTrackPageViewArticle
    id
  }
}

fragment articlePianoPaywallContent on Content {
  __isContent: __typename
  ...hooksPaywallPromiseContent
}

fragment articleSectionsContent on Content {
  __isContent: __typename
  sections {
    value {
      ...helpersCheckIfNewsSectionInFirstIndexSection
      ...entityLink
      name
      id
    }
  }
}

fragment articleSeoArticle_3o8td4 on Article {
  ...hooksArticleSeoArticle
  ...helpersCheckIsPostiesArticle
  ...helpersGetArticleTypeArticle
  entityId
  publishedDate
  updatedDate
  summary {
    text
  }
  subHeadline {
    text
  }
  body(customContents: $customContents, type: $bodyType) {
    text
  }
  keywords
  sections {
    value {
      name
      id
    }
  }
  topics {
    name
    entityId
    id
  }
  urlAlias
  authors {
    name
    id
  }
  images {
    style(filter: {style: "768x768"}) {
      url
    }
  }
  readingTime
}

fragment articleSourceHeaderArticle on Article {
  urlAlias
  ...entityLink
}

fragment authorBlockPrintArticleArticle on Article {
  ...defaultArticleDateContent
  ...authorNamesArticle
}

fragment authorNameAuthor on Author {
  ...entityLink
  name
  entityUuid
}

fragment authorNamesArticle on Article {
  authorLocations
  authors {
    entityId
    location
    ...authorNameAuthor
    id
  }
}

fragment blockquoteQuoteContent on Content {
  __isContent: __typename
  ...contentShareWidgetContent
}

fragment checkersCheckContentContainsStarlingImageContent on Content {
  __isContent: __typename
  topics {
    entityId
    id
  }
}

fragment contentHeadlineContent on Content {
  __isContent: __typename
  headline
  socialHeadline
  ...contentHeadlineTagContent
  ...helpersUseContentSponsorContent
}

fragment contentHeadlineTagContent on Content {
  __isContent: __typename
  ...hooksContentHeadlineTagContent
}

fragment contentNewsletterWidgetContent on Content {
  __isContent: __typename
  topics {
    relatedNewsletters {
      ...helpersMassageToNewsletterItemNewsletter
      id
    }
    id
  }
  sections {
    value {
      relatedNewsletters {
        ...helpersMassageToNewsletterItemNewsletter
        id
      }
      id
    }
  }
  ... on Article {
    relatedNewsletters {
      ...helpersMassageToNewsletterItemNewsletter
      id
    }
  }
}

fragment contentSchemaRenderContent on Content {
  __isContent: __typename
  ...blockquoteQuoteContent
  ...imageContent
  ...inlineWidgetContent
  ...photoGalleryWidgetContent
  ...scmpYoutubeContent
}

fragment contentShareWidgetContent on Content {
  __isContent: __typename
  entityId
  urlAlias
  shortUrl
  socialHeadline
  headline
}

fragment contentSponsorTagContent on Content {
  __isContent: __typename
  ...helpersUseContentSponsorContent
}

fragment contentSubHeadlineContent on Content {
  __isContent: __typename
  subHeadline {
    json
  }
  summary {
    json
  }
  ...contentSchemaRenderContent
}

fragment defaultArticleDateContent on Content {
  __isContent: __typename
  ...hooksArticleDateUtilsContent
}

fragment entityLink on BaseWithApplicationAndUrlAlias {
  __isBaseWithApplicationAndUrlAlias: __typename
  __typename
  entityId
  entityUuid
  urlAlias
  urlRedirect {
    toUrl
    id
  }
  application {
    entityId
    id
  }
  ... on Section {
    fullSectionPath {
      entityId
      id
    }
    parentSection
  }
  ...helpersAppBarVariantBase
  ...helpersApplicationBase
  ...helpersCheckIsPlusArticle
  ...helpersStyleSectionContent
}

fragment helpersAppBarVariantBase on BaseWithApplicationAndUrlAlias {
  __isBaseWithApplicationAndUrlAlias: __typename
  ...helpersCheckIsLiveArticle
  ...helpersCheckIsPlusPage
  ...helpersCheckIsPostiesArticle
  ...helpersCheckIsPostiesPage
  ...helpersCheckIsPostMagazineArticle
  ...helpersCheckIsStyleArticle
  ...helpersSectionContent
  ...helpersStyleSectionContent
}

fragment helpersApplicationBase on BaseWithApplicationAndUrlAlias {
  __isBaseWithApplicationAndUrlAlias: __typename
  ...helpersCheckIsPostiesArticle
  ...helpersCheckIsPostiesPage
  ...helpersCheckIsPlusPage
}

fragment helpersCheckIfNewsSectionInFirstIndexSection on Section {
  name
}

fragment helpersCheckIsAmpEnabledArticle on Article {
  entityId
  types {
    value {
      entityId
      id
    }
  }
  sections {
    value {
      entityId
      id
    }
  }
  disableOffPlatformContent
  sponsorType
  published
  ...helpersCheckIsPlusArticle
  ...helpersCheckIsPostiesArticle
}

fragment helpersCheckIsLiveArticle on Article {
  flattenTypeIds
  liveArticle {
    status
    id
  }
}

fragment helpersCheckIsMainTopicContent on Content {
  __isContent: __typename
  topics {
    entityId
    id
  }
}

fragment helpersCheckIsPlusArticle on Content {
  __isContent: __typename
  ... on Article {
    paywallTypes {
      entityUuid
      id
    }
  }
}

fragment helpersCheckIsPlusPage on Page {
  urlAlias
}

fragment helpersCheckIsPostMagazineArticle on Article {
  sections {
    value {
      entityId
      id
    }
  }
}

fragment helpersCheckIsPostiesArticle on Article {
  sections {
    value {
      entityId
      id
    }
  }
}

fragment helpersCheckIsPostiesPage on Page {
  urlAlias
}

fragment helpersCheckIsStyleArticle on Content {
  __isContent: __typename
  sections {
    value {
      entityId
      id
    }
  }
}

fragment helpersGetArticleTypeArticle on Content {
  __isContent: __typename
  ... on Article {
    types {
      value {
        entityId
        id
      }
    }
  }
}

fragment helpersMassageToNewsletterItemNewsletter on Newsletter {
  entityId
  name
  alternativeName
  description {
    text
  }
  summary {
    text
  }
  homepageDescription {
    text
  }
}

fragment helpersSanitizeArticleTypeEntityIdsArticle on Article {
  types {
    value {
      entityId
      id
    }
  }
}

fragment helpersSanitizeAuthorTypesArticle on Article {
  authors {
    types
    id
  }
}

fragment helpersSanitizedAuthorEntityIdsArticle on Article {
  authors {
    entityId
    id
  }
}

fragment helpersSectionContent on Section {
  fullSectionPath {
    entityId
    id
  }
}

fragment helpersStyleSectionContent on Section {
  fullSectionPath {
    entityId
    id
  }
}

fragment helpersUseContentSponsorContent on Content {
  __isContent: __typename
  topics {
    entityId
    sponsor {
      ...sponsorTagSponsor
      name
      type
      id
    }
    id
  }
  ... on Article {
    sponsorType
  }
  ...helpersCheckIsMainTopicContent
}

fragment hooksArticleDateUtilsContent on Content {
  __isContent: __typename
  createdDate
  publishedDate
  updatedDate
}

fragment hooksArticleSeoArticle on Article {
  ...helpersCheckIsPostiesArticle
  ...helpersCheckIsPostMagazineArticle
  ...helpersCheckIsStyleArticle
  ...hooksContentHeadlineTagContent
  ...helpersCheckIsAmpEnabledArticle
  entityId
  headline
  socialHeadline
  types {
    value {
      entityId
      id
    }
  }
  authors {
    entityId
    id
  }
  images {
    generic_og: style(filter: {style: "og_image_scmp_generic"}) {
      url
    }
    styles(filter: {styles: ["og_image_posties_article", "og_postmag", "og_image_style", "og_image_scmp_analysis", "og_image_scmp_explainer", "og_image_scmp_editorial", "og_image_scmp_fact_check", "og_image_scmp_debate", "og_image_scmp_live", "og_image_scmp_obituary", "og_image_scmp_opinion", "og_image_scmp_review", "og_image_scmp_series", "og_image_scmp_generic"]}) {
      url
      style
    }
    type
  }
  urlAlias
}

fragment hooksContentHeadlineTagContent on Content {
  __isContent: __typename
  __typename
  ... on Article {
    types {
      value {
        name
        entityId
        description {
          text
        }
        id
      }
    }
    ...helpersCheckIsStyleArticle
  }
  flag
  sections {
    value {
      name
      id
    }
  }
  ...hooksContentHelperContent
}

fragment hooksContentHelperContent on Content {
  __isContent: __typename
  ...helpersSanitizeArticleTypeEntityIdsArticle
  ...helpersSanitizeAuthorTypesArticle
  ...helpersSanitizedAuthorEntityIdsArticle
  flag
}

fragment hooksPaywallPromiseContent on Content {
  __isContent: __typename
  entityId
  ...helpersCheckIsPostiesArticle
}

fragment hooksTrackPageViewArticle on Article {
  entityId
  publishedDate
  headline
  sections {
    value {
      name
      id
    }
  }
  urlAlias
  authors {
    name
    id
  }
  entityUuid
}

fragment imageContent on Content {
  __isContent: __typename
  headline
  ...checkersCheckContentContainsStarlingImageContent
}

fragment inlineWidgetContent on Content {
  __isContent: __typename
  ...contentNewsletterWidgetContent
}

fragment mainImagePrintArticleArticle on Article {
  images {
    title
    url
    isSlideshow
    size_652x446: style(filter: {style: "652x446"}) {
      url
    }
  }
}

fragment photoGalleryDialogContent on Content {
  __isContent: __typename
  __typename
  ...contentShareWidgetContent
}

fragment photoGalleryWidgetContent on Content {
  __isContent: __typename
  ...photoGalleryDialogContent
}

fragment scmpYoutubeContent on Content {
  __isContent: __typename
  entityId
  urlAlias
  publishedDate
}

fragment sponsorTagSponsor on Sponsor {
  name
  type
  images {
    url
  }
}


sections

types

disableOffPlatformContent

sponsorType

published

headline

socialHeadline

authors

images

publishedDate

updatedDate

summary

subHeadline

keywords

topics

readingTime

authorLocations

entityUuid

Nicholas Spiro

Since the start of this year, sentiment in financial markets has deteriorated dramatically. The scale and severity of the loss of confidence among investors has been staggering, pummelling nearly all asset classes and causing a fundamental reassessment of the prospects for the global economy and markets as the era of ultra-cheap money comes to an end.
While there are numerous forces at play, one of the most important in the past few months has been the growing influence of China’s economic and financial problems. The two main factors weighing heavily on asset prices – the surge in inflation and the sharp deceleration in economic activity – are increasingly seen through the prism of Beijing’s much-criticised “dynamic zero-Covid” policy.
Coming when Russia’s invasion of Ukraine has caused many foreign investors to view China – Moscow’s most important ally – in a less favourable light, the economic damage wrought by the government’s zero-tolerance approach has had a much more negative impact on sentiment than many investment strategists anticipated.
The unexpected citywide lockdown of Shanghai, China’s most populous city and home to the world’s busiest port, has taken the battle against the virus into a new and more dangerous phase and made it much more consequential for the global economy and markets.
In the past two months, a China scare has taken hold despite more forceful attempts by the government to shore up confidence in the nation’s rapidly slowing economy. The most conspicuous sign of the deterioration in sentiment was the steep fall in the value of the yuan versus the US dollar last month, accentuated by record outflows of foreign capital from China’s once-resilient government debt market.




In a report published on Tuesday, JPMorgan said the dramatic decline in the yuan – the currency’s worst month versus the US dollar in history – had “reignited fears of 2015-16-type domestic capital flight”. While the comparison is inapt, not least because of the imposition of stricter capital controls following the botched 2015 currency devaluation, there are deeper concerns this time around.
The previous crisis stemmed mainly from Beijing’s poor communication with markets and was defused relatively quickly through defter management of the exchange rate. The current turmoil, however, is attributable to a heavily politicised strategy to stamp out Covid-19 at all costs. Investors have belatedly recognised that more stimulus cannot compensate for draconian lockdowns with no exit strategy in sight.
Still, although the mounting economic and financial costs of China’s zero-Covid policy have become a more important driver of global markets, the China scare needs to be put in perspective.
First, there are several scares in markets right now, each feeding on others and amplifying the selling pressure. The most important one by far is the abrupt and much sharper-than-expected shift towards tighter monetary policy, led by the US Federal Reserve.
What can China do to mitigate impact of US Fed interest rate hike?
The about-turn by the Fed has driven a coach and horses through the regime that has underpinned global asset prices during the past decade. Not only can the world’s most important central bank no longer be relied on to rescue markets during periods of turmoil, it will be difficult for the Fed to suppress inflation sufficiently without causing a severe downturn and possibly a recession.
Even if the US central bank is able to engineer a softer landing than many fear, the damage to asset prices, including Chinese bonds, has already been severe. This is a Fed-driven sell-off, not a China-induced one.
Second, Chinese stocks, whose dramatic decline has left them below their level at the start of 2020, are pricing in a lot of bad news. On the other hand, the benchmark S&P 500 index – which is still up more than 70 per cent since the trough of the pandemic-induced sell-off in March 2020 – has barely begun to reflect the risks of aggressive policy tightening.


There are good reasons to be cautious about investing in Chinese equities, but at least valuations are more attractive and policy is moving in the opposite direction to that in advanced economies.
Third, it is precisely because investor confidence in China has been shattered that there is more scope for an improvement in sentiment. Right now, the number of daily new Covid-19 infections is what matters most. The absence of community transmission in Shanghai, which accounts for most of the new confirmed cases nationwide, could lead to an easing of restrictions if it continues, and could provide a fillip to asset prices.
It was only a few months ago that many Wall Street firms were betting that Chinese stocks would stage a strong recovery this year. The fact that foreign investors were still bullish on China in the face of severe domestic and external headwinds is reason enough to be wary of the extreme bearishness pervading Chinese markets today.
Nicholas Spiro is a partner at Lauressa Advisory


Why it’s not all doom and gloom for China’s battered markets

The entrance of a residential area is closed off during a lockdown in Shanghai on May 5. Lockdowns in major Chinese cities are just one of several factors weighing on sentiment towards the Chinese economy and equities. Photo: Reuters

Opinion

Comment

Business

Coronavirus

Greater China

Analysis & Opinion


While the mounting costs of China’s zero-Covid policy have become an important driver of global markets, there is more to this story
The Federal Reserve’s hawkish turn is an equally important factor in the global sell-off, and Chinese stocks are early in pricing in bad news



While the mounting costs of China’s zero-Covid policy have become an important driver of global markets, there is more to this story. The Federal Reserve’s hawkish turn is an equally important factor in the global sell-off, and Chinese stocks are early in pricing in bad news.


China economy

China stock market

Coronavirus China

Coronavirus pandemic

Currencies

US Federal Reserve

Macroscope

Expresses the views, ideas and conclusions of the author. (Eg. Enough of Crazy Rich Asians, think of crazy poor Hongkongers.)


Column

Macroscope | Why it’s not all doom and gloom for China’s battered markets

While the mounting costs of China’s zero-Covid policy have become an important driver of global markets, there is more to this story The Federal Reserve’s hawkish turn is an equally important factor in the global sell-off, and Chinese stocks are early in pricing in bad news

While the mounting costs of China’s zero-Covid policy have become an important driver of global markets, there is more to this story

The Federal Reserve’s hawkish turn is an equally important factor in the global sell-off, and Chinese stocks are early in pricing in bad news