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(Reuters) -U.S.-listed shares of China firms slumped in premarket trading after Xi Jinping’s newly unveiled leadership team sparked investor fears that ideology-driven policies would be prioritized at the cost of private sector growth.
Ecommerce firms Alibaba (NYSE:BABA) and JD (NASDAQ:JD).com and internet giant Baidu (NASDAQ:BIDU) dropped between 11% and 16%, while S&P 500 futures edged up 0.4%.
The iShares MSCI China ETF skid 8.3%, tracking a sharp fall in Hong Kong shares, led by losses in the technology and property sectors.
President Xi secured a precedent-breaking third leadership term on Sunday and introduced the new Politburo Standing Committee stacked with loyalists.
Investors were taken aback by the surprising consolidation of power under Xi that could lead to faster policy execution resulting in either a boost or curbing investments, depending on the underlying policy.
“With less and less checks on the power that Xi Jingping now has, investors are worried about what could happen to the economy and what kind of direction it would be sent into,” said Sam Stovall, chief investment strategist at CFRA Research, New York.
Music streaming co Tencent Music, e-commerce platform Pinduoduo (NASDAQ:PDD) and mobile game publisher Bilibili (NASDAQ:BILI) shed between 13% and 17%.
Education companies New Oriental Education & Technology Group and Gaotu Techedu dropped about 11% each, while electric vehicle firms Nio (NYSE:NIO) Inc, Xpeng (NYSE:XPEV) and Li Auto fell between 10% and 11%.
“While there were no new announcements on the policy front, the departure of perceived pro-stimulus officials and reformers … and replacement with allies of Xi, suggest that ‘Common Prosperity’ will be the overriding push of officials,” strategists at TD Securities said.
Meanwhile, concerns about COVID curbs and global recession risks overshadowed data showing China’s economy rebounded faster than expected in the third quarter.
