Rumors that strict lockdowns due to COVID-19 may end have sent China’s stock market soaring this week despite no announced changes, prompting investors to scramble for months It shows a longing for an end to relentless negative news.
Officials have said nothing about easing the COVID-zero policy that has made China a global outlier and has hurt the world’s second-largest economy while curbing infections. In fact, the official announcement favors a “dynamic zero” approach.
Almost three years after the coronavirus was first detected in central China, the number of daily cases hit a six-month high on Friday. and state media have repeatedly said that zero COVID is the key to saving people’s lives.
Even an unconfirmed social media post on Tuesday that sparked the market boom said the “Reopening Commission” would not aim to ease restrictions by March.
Still, investors are piling up, with the stock market gaining more than $1 trillion in value in just four days. The benchmark’s CSI300 index .CSI300 is up more than 6% this week, while Hong Kong’s Hang Seng Index .HSI is up nearly 9%, its best week in a decade.
“Will China open or not? That is what investors are most interested in right now,” said Qi Wang, CEO of MegaTrust Investment (HK).
“I don’t know if the rumors are true. My view is that China will eventually[have to open up]… to prioritize economic growth,” he said.
Stocks soar Friday and the yuan rises as U.S. inspections over audits of Chinese companies end ahead of schedule and Beijing ends a system of banning individual flights to bring in coronavirus-infected passengers. Helped by reports of working on a plan.
Investors have pounced on sectors that would benefit from reopening, such as tourism, hotels and catering. The US-listed tech giant has taken the lead after the audit news.
But sober minds warn that the trajectory of China’s coronavirus deregulation does not resemble this week’s stock chart.
Nanjing-based hedge fund manager Zhang Kaihua said the reopening from COVID is likely to take a “steady and step-by-step approach” similar to China’s long-term but successful economic liberalization. rice field.
“I don’t think China will go for a Western-style opening because if it’s a mistake, the consequences would be intolerable.”
He dismissed this week’s rumors as a mere excuse to boost battered stocks, saying China’s leadership needs time to “make the right decisions that will stand the test of history.”
Even after rising, the CSI300 index is down 24% this year.
“If our leadership doesn’t stick to zero COVID, China will go to hell,” said Yin Peixin, investment manager at Shanghai Jianlong Asset Management Co.
Infections will skyrocket, health care systems will collapse, there will be severe labor shortages and inflation will skyrocket, Yin said.
But while some believe China needs to balance its response to the coronavirus with economic growth, economic growth is likely to continue as the rest of the world chooses to open up their economies and coexist with the coronavirus. are under great pressure.
“It is true that zero COVID protects the older generation. But zero COVID-19 comes at a high price for the younger generation, so after all factors, I believe China will make a trade-off.” increase”
MegaTrust’s Wang says there are signs that COVID restrictions are loosening more than they were months ago, even though COVID remains zero. The opening in Hong Kong “shows that China really wants to reopen its economy,” he said.
Jason Lui, head of East Asia strategy at BNP Paribas, said the rise was likely unsustainable without official announcements on COVID policies in the coming weeks given other economic headwinds.
“While the spirit of reopening is well understood by the market, concrete evidence and announcements are needed to sustain the market dynamics we have seen over the past week.
Source: Reuters (Reporting by Samuel Shen and Georgina Lee, Editing by Vidya Ranganathan and William Mallard)