Shanghai stocks close flat as Chinese Premier Li Keqiang warns about the employment situation

·3 min read

Mainland Chinese stocks closed marginally higher even as Chinese Premier Li Keqiang warned of a "complicated and grim" outlook and urged local governments to rescue the economy and ensure jobs stability amid the Covid outbreak.

The Shanghai Composite Index rose less than 0.1 per cent to 3,004.14 on Monday, a level last seen on April 29. The Shenzhen Component Index lost 0.4 per cent to 10,765.63.

Hong Kong's stock market was closed for a public holiday.

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Pharmaceuticals firms stood out in Shanghai. China Meheco and China Res Double-Crane climbed 3.2 per cent to 26.43 yuan and 10 per cent to 30.16 yuan, respectively. Jiangxi Synergy Pharmaceutical surged 20 per cent to 28.32 yuan in Shenzhen.

BYD fell 3.9 per cent to 232.73 yuan in Shenzhen after authorities in the southeastern city of Changsha launched an investigation into the carmaker, following allegations that excessive emissions from its plant caused nosebleeds in children. BYD denied the allegations.

The Shanghai Composite Index has retreated over 17 per cent this year, while the Shenzhen Component Index has tumbled 27.5 per cent, wiping out around 17.7 trillion yuan (US$2.6 trillion) of market value in total amid mounting economic toll from stringent curbs under China's zero-Covid policy.

In a teleconference with provincial leaders on Saturday, China Premier Li Keqiang said employment conditions were "complicated and grim", urging local authorities to step up their efforts on stabilising employment to "ensure the achievement of the annual employment goal and welcome the victory" of the Communist Party's national congress.

While the Covid situation in China was improving, it was still "complicated and severe", analysts at Beijing-based CSC Financial wrote in a report.

"Growth policies and economic recovery on the ground are still awaited," the analysts wrote. Pressure from inflation overseas and the interest-rate increase in the US also posed challenges for the Chinese yuan, they added.

While new infections in Shanghai, China's financial capital, fell to 3,947 cases over the past 24 hours, marking a 16th straight day of decline, new curbs were put in place to prevent a resurgence of cases.

With businesses in Shanghai gradually resuming production, some 2,000 key manufacturers are likely to obtain fresh funds from banks after the central bank asked lenders to grant easy credit to these companies to bolster their operations.

Similarly, China's state-owned commercial landlords in Shanghai also promised to exempt their tenants from rents for up to six months, following a call by the central government and city authorities to rescue embattled small businesses and save jobs in the financial hub.

With Covid lockdowns being eased, the pressure on businesses is easing and manufacturing activity is witnessing a recovery, Citic Securities said in a report.

"The extreme pessimism in the market has been fully released, so we expect a midterm repair starting in May, which will last for several months," the report said.

This article originally appeared in the South China Morning Post (SCMP), the most authoritative voice reporting on China and Asia for more than a century. For more SCMP stories, please explore the SCMP app or visit the SCMP's Facebook and Twitter pages. Copyright © 2022 South China Morning Post Publishers Ltd. All rights reserved.

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