Yesterday, the Chinese government issued an order to lockdown Chengdu, a southwestern city, as it launched a 4-day citywide Covid-19 test, following a recent spike in cases.
Chengdu, the capital of Sichuan province and one of the largest cities in China, is home to over 21 million people. All residents were ordered to stay at home from 6:00 pm from Thursday (Sep 1), with households allowed to send one person a day to shop for necessities, the city government said in a statement.
Chengdu is the largest city to be shut down since Shanghai was closed for two months earlier this year. It was unclear whether the lockdown would be lifted when the major testing operation ended on Sunday.
Bloomberg immediately reported after the lockdown announcement, quoting a trader from Shanghai Dongwu Jiuying Investment Management Co., that investors panicked after hearing about the lockdown in Chengdu due to the potential big impact of the recent moves and Covid flare ups elsewhere in China.
Finansia Syrus Securities (FSS) stated that Chengdu is one of the top digitized cities in China and a home for 33 auto manufacturing plants such as Toyota, Volkswagen and Volvo as well as supporting EV business. The city is also a hub of trade, transportation, finance, science and technology.
One of Foxconn factories is located in Chengdu, while partially being a production base of Apple’s MacBook and iPad.
FSS believed that impact to Apple should be limited as the company is relocating to Vietnamto produce MacBook, iPad and Apple Watch, while India produces iPhone and Malaysia produces Mac mini.
However, HANA’s business could take a hit if the lockdown prolongs further as 18% of total revenue comes from production plants in China even with the plant locating in Jiaxing, Zhejiang province, but could have taken an impact from tight supply chain or smartphone sector (HANA’s main products in China) that could get disrupted from the lockdown measure.
Moreover, China slowly implements lockdown measures city by city and could slow down purchasing power in Chinese consumers as well as delay its economic reopening.