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Mark Mobius a Legendary Investor Believes the COVID Protests Would Cost China’s Stock Market

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Mark Mobius, an experienced money manager, says that China’s strict zero-COVID policies will backfire soon and hurt investors in that country a lot.

Ten people died in an apartment fire in the capital of Xinjiang province, Urumqi, last week, which sparked rare public protests against COVID lockdowns. At the same time, workers at the world’s largest iPhone factory, in Zhengzhou, fought with the police over poor working conditions.

But Mobius says that even though people are protesting China’s COVID policies all over the country, government officials are not likely to change their minds any time soon.

“It’s apparent to me that Xi cannot accept any protests, therefore any protestors will face a harsh punishment.” More individuals will be imprisoned, and they will almost certainly go further in terms of population control in many areas,” said the founder of Mobius Capital Partners and an emerging markets specialist.

That’s terrible news for Chinese stocks, which have already been under pressure this year, with the Hang Seng Index down 25% and the Shanghai Composite Index down 15% year to date.

“If you have that kind of scenario, you have to expect that the market would not do that well in the short term,” Mobius added, predicting another 10% drop in Chinese indices.

Still, Mobius went on to say that “people’s memories are very short” and that “very cheap” Chinese stocks will recover at some point as investors look for value. “Things will get better,” he said. “But I don’t think it’s realistic to hope that the central government will change its mind right now.”

Mobius isn’t the only investor who is worried about the COVID protests in China. Mark Haefele, the chief investment officer at UBS Wealth Management, said in a note on Monday that China’s protests and rising number of COVID cases are a “setback” for the country.

“With a relaxation of the zero-COVID policy still some time away,” he added, “we see persistent near-term headwinds for China’s recovery.”

In their first note of the week, Citi strategists reiterated Haefele’s remarks, stating that the recent protests represent a “setback of sentiment” for Chinese investors.

“The road to reopening is likely to be bumpy, with local infections likely to stay high during the winter months and until vaccination rates climb more significantly,” they concluded. Mobius warned that, in addition to the recent protests and COVID lockdowns, every investor in China must face the increased probability of conflict.

“My concern is…what happens if China decides to attack Taiwan?” he said. “Because if that happens, it will be like Russia all of your investments in China will be lost.”

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