Here's what we know about the rebound in Chinese stocks this week

Here’s what we know about the rebound in Chinese stocks this week

Residents wearing personal protective equipment (PPE) line up to enter a specialized hotel for medical observation and quarantine in Zhengzhou city on November 1, 2022.

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BEIJING — Chinese stocks rallied this week as investors hoped Beijing would soon ease its tough Covid policy.

The Shanghai composite gained 5% during the week. The Hang Seng Index posted weekly gains well over 8%, rebounding from 13-year lows hit in the past two weeks.

The Chinese government has yet to announce any official policy change. Covid-related travel restrictions, regular virus testing requirements and other measures have generally remained as stringent.

However, the stock market rally that accelerated on Friday followed multiple unconfirmed rumors of an upcoming Covid policy change.

“The rally we saw this morning was mostly triggered by hopes of an earlier-than-expected reopening,” Zhiwei Zhang, president and chief economist of Pinpoint Asset Management, told CNBC’s “Capital Connection” on Friday. .

Zhang pointed to a closed-door speech Friday morning by a chief scientist at the Chinese Center for Disease Control and Prevention that suggested a transition away from the zero-Covid policy could happen soon.

CNBC was unable to verify the comments made in the speech. The Center for Disease Control and the National Health Commission did not immediately respond to a request for comment.

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Chinese financial media outlet Cailian Press reported that officials would hold a press conference Saturday afternoon at the National Health Commission based on virus control and prevention measures.

Controls and continued Covid outbreaks remained a drag on China’s economy, which grew just 3% in the first three quarters of the year from a year ago. Economists have cut their growth forecasts next year on expectations that restrictions will persist, while the rest of the world has shifted to a “living with Covid” approach.

On Monday, mainland China marked the end of a period of heightened Covid restrictions due to the Mid-Autumn Festival in September, the National Day in early October and the 20th National Congress of the ruling Chinese Communist Party in late October.

This week, some official descriptions of Covid included notable mentions of how the virus was “self-limiting” and controllable.

However, the Chinese Communist Party newspaper People’s Daily maintained that the isolation was still necessary.

The National Health Commission has also affirmed its adherence to what is officially called the dynamic zero-Covid policy.

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“The clearest signal has been given. In the short term, China will stick to its unyielding commitment and zero-tolerance approach, pursuing the zero-Covid stance as one of the strongest virus elimination policies. strictest in the world,” said Bruce Pang, chief economist and head of research for Greater China at JLL.

“But in the long term, China should continue to make its Covid response more scientific and targeted, leading to a softer policy stance, flexible measures and gradual easing.[r] restrictions,” he said.

Pang does not expect the policy to be scrapped until late June 2023 at the earliest.

This week’s market rumors did not provide further details on the timing of the changes.

Pinpoint’s Zhang added that a midday Bloomberg report, citing sources, said U.S.-listed Chinese stocks such as Alibaba may remain listed on U.S. exchanges.

The China Securities Regulatory Commission, Ministry of Finance and US Public Company Accounting Oversight Board did not immediately respond to CNBC’s requests for comment.

– CNBC’s Sam Vadas and Abigail Ng contributed to this report.

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