Chinese markets weakened after the Party congress concluded with a reshuffle of the nation’s economic policy team, as investors expressed disappointment at the new leadership filled with President Xi Jinping’s allies.
The offshore yuan weakened as much as 0.7% to 7.2782 per dollar Monday morning to approach a record low seen last week. The People’s Bank of China set the yuan fixing at 7.1230 per dollar, away from the recent pattern of near 7.11 per dollar. The Hang Seng China Enterprises Index fell more than 2%.
The reshuffle announced after the Party congress highlighted Xi’s unquestioned grip over the ruling party, with loyalists set to take up key economic posts. While that may help accelerate key agendas, the addition of Covid Zero advocates to the Politburo Standing Committee diminishes the chance of any early loosening of Covid restrictions.
Investors were disappointed during the congress last week as Xi defended his Covid Zero policy and fell short of offering stimulus to shore up the property market. The onshore yuan fell to the weakest level in 14 years and the CSI 300 slumped in all but one session last week.
While markets may see some initial support this week on renewed policy hopes, overall sentiment will remain cautious as investors await growth data for the third quarter, which had been abruptly delayed last week.