Alibaba, JD.com Tumble in US as Xi Asserts Full Control in China

US-listed Chinese stocks tumbled in premarket trading, with investors spooked by President Xi Jinping’s tightening grip on China’s ruling party, as he embarks on a precedent-breaking third term with rivals gone and no successor in sight.

The KraneShares CSI China Internet Fund, an exchange traded fund that includes more than 40 Chinese stocks, slid 13%. Major Chinese internet stocks from Alibaba Group Holding Ltd. to JD.com Inc. saw double-digit declines. In Johannesburg, Tencent Holdings Ltd.’s biggest shareholder Naspers Ltd. plunged 12%.

Monday’s selloff came after Xi packed the Politburo Standing Committee with six loyalists during the party’s twice-a-decade leadership reshuffle, with the unprecedented power play demonstrating his unchallenged control of the country’s top decision-making body.

Such dominance, however, adds to concerns that China may hold back for longer on fully reopening its economy, with fewer voices at the apex of power to question Xi’s Covid Zero policies. Investors also worry the ruling party may stick to its hard-liner approach toward domestic private enterprises and tech entrepreneurs, while ramping up military pressure on Taiwan.

“The concern is that absolute power may lead to harsh policy both locally and internationally,” said Sharif Farha, head of investments at HB Investments. “On a local level, zero covid policy or tougher regulations on China tech may not go away. On an international level, the market is definitely concerned about political tensions.”

Sharp Drops

Today’s declines for US-listed stocks follow a sharp retreat for Hong Kong-listed peers, which sent the Hang Seng Index down to its lowest level since 2009. The CSI 300 Index fell nearly 3%, as foreign investors sold a record $2.5 billion of mainland shares via exchange links in Hong Kong. Meanwhile, the offshore yuan declined to the weakest level against the dollar on record.

Elsewhere, a raft of delayed economic data showed a mixed recovery in China in the third quarter, with unemployment rising and retail sales weakening in September despite a pickup in growth. The ailing real estate sector -- a key risk factor denting investor sentiment toward Chinese equities -- contracted for a fifth quarter, extending its longest slump in history.