Beijing is experiencing a rash of panic buying by residents as fears of a COVID-related lockdown akin to Shanghai’s current lockdown shake China’s capital, reports Financial Times. Fears of a second major city under lockdown due to China’s zero-tolerance policy have sent shares tumbling and have had broader impacts on global markets.

Health officials ordered lockdowns of several neighborhoods as well as mass testing in Beijing on Monday as Omicron transmission chains were tracked back through parts of the city’s communities. Shanghai continues its weeks-long lockdown with 19,000 new cases and 51 deaths reported on Sunday, a record high for reported fatalities in China.

Mainland China’s CSI 300 had its single largest one-day drop since February 2020 as investors both within China and overseas sold stocks. The Hang Seng Index and Hang Seng Tech Index closed down on Monday, with all sectors ending in the red but value sectors losing the least. The Hang Seng Index closed at 19,869, triggering the liquidation mechanisms that occur for products that had a redemption at 20,000 and further exacerbating the sell-off, explains KraneShares in the China Last Night blog.

The impacts of the tumble of China’s markets and economic fears been broad-ranging: China is the biggest global importer of oil, and as news of the possibility of a Beijing lockdown reached international markets, Brent crude fell 6% to $100.21 per barrel.

“As in previous times when markets have cracked, a lot of headwinds are coming together, although the China situation looks like the big catalyst today,” Neil Birrell, chief investment officer at Premier Miton Investors, told FT. “It is hard to find good news anywhere and I can find good reasons to be negative on almost every asset class.”

Fears of further slippage of China’s currency against the U.S. dollar have prompted the People’s Bank of China (the central bank in China) to cut the foreign currencies that banks keep as reserves, essentially throwing a brake on CNY’s depreciation.

“Neither the PBOC’s comments over the weekend on more policy support nor a South China Morning Post article on the US and China closing in on a Holding Foreign Companies Accountable Act solution could stabilize markets,” KraneShares writes.

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