Hang Seng Drops to Its Lowest Since 2009, Ripples Effect on AUD

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Wall Street session closed with major US indexes showing healthy gains. 

This gave hope to the Asia-Pacific market and allowed the ASX200 to close by 103 points. The market performance for this day was due to Wall Street gains on the hope the US Fed will ease off on the aggressive inflation.

Most industry sectors in the ASX200 rose, with real estate firms and industrial and financial stocks leading. And despite weaker performances of the mining and energy stocks, lithium producer Sayona Mining closed with a 10.6% rise.

Unfortunately, this didn’t apply to the Chinese market. The Hang Seng Index (HSI) dropped 6.36%, the lowest level since 2009, with the US-traded NASDAQ Golden Dragon China index falling more than 14% in the New York Trading. This drop was the most significant one-day percentage decline on record.

The decline extended to more than 200 US-listed Chinese firms, resulting in Chinese President Xi Jinping securing his third term. As OANDA analyst Edward Moya noted, Jinping retaining power over China was already expected, but it “hardly impressed the financial markets”.

Global Chief Investment Officer Mark Haefele also noted, “While Chinese politics have long been opaque, this sharp consolidation of power is adding to investor unease.” This added to the Chinese market’s decline and the increasing political tension between Washington and Beijing.

The Australian dollar came off its overnight low of 62.73 US cents and was buying at around 63.22 US cents by 4:15 AEDT. But the lower Australian dollar benefited oil refiner and service station owner Ampol. The company reported a surge in profits for the past nine months despite shares losing 12.6%.

Ampol’s Chief Executive Officer Matt Halliday notes that market volatility will remain. “Volatility has continued to be a feature of global markets as the competing forces of fears of a weaker economic outlook, increasing mobility, and geopolitical tensions continue to swing market sentiment.”

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