China’s COVID Surge Disrupts Beijing Trading Floors and Shanghai Finance Hub, According to Reuters

COVID-19 Spreads Through Financial Centers, Disrupting Trade and IPOs

COVID-19 is making its way through trading floors in Beijing and spreading rapidly in Shanghai, resulting in reduced trading activity and the cancellation of a weekly meeting by regulators overseeing public share sales.

Banks and asset managers are reverting to contingency plans created for previous COVID outbreaks, adding more uncertainty to the already volatile currency and stock markets, which are grappling with the challenges of moving past strict health restrictions.

Following the abrupt abandonment of the zero-COVID policy earlier this month, mass testing has ceased, leading to unreliable official data on new case numbers. Internal surveys from major asset managers and banks indicate that more than half of their employees in Beijing, the epicenter of the recent surge, have tested positive for the virus.

A fund manager from PICC Asset Management noted, "I would say more than half of colleagues in Beijing are sick, compared to 5%-10% in Shanghai."

In the interbank market, the average daily trading volume of the yuan against the dollar dropped to approximately $20 billion last week, marking the lowest level since April 2022, during Shanghai’s stringent two-month lockdown aimed at curbing the virus’s spread.

Similarly, stock trading volume declined, with the total number of shares traded last week reaching 139 billion, slightly below the three-year average of around 143 billion shares.

Most currency traders in Beijing are absent from their offices, which naturally leads to a decrease in trading volume, according to a trader at a state-owned bank who requested anonymity. The bank has directed employees living with anyone exhibiting fever symptoms or who has tested positive to stay home. "Remote trading doesn’t solve the issue if you’re sick in bed, and you also have family responsibilities," the trader commented.

The ongoing pandemic is also affecting initial public offerings (IPOs), as the regulatory body overseeing such offerings canceled its weekly vetting meeting last week, with no clarity on whether it will be rescheduled. Additionally, a news conference for November’s economic data was called off by the National Bureau of Statistics.

However, businesses that have endured years of strict COVID measures are often better equipped to handle such disruptions. A banker at Haitong Securities in Shanghai stated, "We travel frequently, and multiple people are involved in an IPO project, so we rotate responsibilities if one banker is on sick leave."

Still, the current situation presents unprecedented challenges as the virus spreads widely. A senior trader at a Chinese bank shared, “We have a backup and recovery disaster plan and have reinstated backup offices in two locations, similar to our approach during the Shanghai lockdown in April and May. We are doing everything possible, as this wave of infections could be the worst since the first half of 2020.”