Hang Seng Index Falls Below 20,000 Level

• Selling pressure on Chinese equities remain elevated as surge in Covid cases has forced authorities to impose new lockdowns in big cities including Shenzhen, where over 17 million residents were prohibited from leaving the city after 60 new cases were reported on Sunday.
• The strict ‘Zero-Covid’ policy has been weighing on growth expectations and therefore have left domestic risky assets vulnerable in recent weeks (combined with geopolitical uncertainty and renewed crackdown fears).
• The Hang Seng index is now down 22% from its February high and fell below its 20,000 support level on Monday to reach a low of 19,416.80, its lowest level since March 2016.
• Last week, China aggregate financing rose significantly less than expected in February by 1.19tr CNY (vs. 2.2tr expected), down from 6.17tr CNY the previous month.
• Even though there is strong seasonality in China TSF data, we previously saw that officials may need to accelerate the easing policy (either more liquidity or rate cuts) in the coming months to stimulate both the economic activity and risky assets.
• This week, the PBoC is expected to cut its 1Y MLF facility by 10bps to 2.75% (March 15) and is also likely to reduce the banks’ RRR according to analysts.

Source: Bloomberg/MNI