Hong Kong shares dive 5.4 percent as China shuts down Shenzhen

HONG KONG

Hong Kong’s share index plunged 5.4 percent yesterday after the neighboring Chinese city of Shenzhen was ordered into a shutdown to combat China’s worst COVID-19 outbreak in two years.

China on March 13 said it will place all 17.5 million residents in Shenzhen under lockdown as it battles a flare-up of COVID-19 cases across the country.

Public transport has been suspended and officials have told all residents to stay at home, with the lockdown set to last until March 20.

The move has led Foxconn, which is a key supplier for Apple and maker of iPhones, to halt operations in the city.

The Taiwanese firm, which is also known as Hon Hai Precision and has its Chinese base in the city, did not say how long it would keep its plant shut, but had relocated production to other sites.

The Hang Seng Tech Index shed around 10 percent yesterday, with market heavyweights Alibaba and Tencent down a similar amount.

“The first-channel effect of Shenzhen’s lockdown in Asia-Pacific markets is tech equities,” Stephen Innes at SPI Asset Management said. “Second-order effects include the yet-to-be-determined impact on global supply chains and inflation, as well as growing domestic downside risks to China’s economy.”

Shenzhen is also home to some of China’s most prominent companies, including telecom equipment maker Huawei Technologies, electric car brand BYD Auto, Ping An Insurance and Tencent Holding, operator of the popular WeChat message service.

Infection numbers in mainland China are low compared with other countries and with Hong Kong, which reported more than 32,000 new cases on March 13. But Beijing’s “zero tolerance” strategy has led to lockdowns of entire cities to find and isolate every infected person.