Here’s how much more Chinese stocks could rally from zero-COVID, Goldman Sachs strategists say

China is another focus, and Wall Street received a small boost late last week following rumors of a relaxation of the country’s COVID-zero policy, although officials have denied that has happened. produced over the weekend.

China’s no-tolerance COVID rules have at times been tough on the country’s markets and Wall Street. Markets remain hopeful that Beijing will eventually fold, as we see these COVID policies interfering with Apple’s ability to sell more big-dollar phones in time for Christmas (see The Buzz).

Start your engines now for China’s grand reopening, says our call of the day from Goldman Sachs, which sees the country’s stock markets soar as much as 20% once the grand reopening arrives. “Cross-country empirical analysis shows that stock markets tend to reopen before trading about a month in advance, and positive momentum typically lasts 2-3 months,” said a team of strategists led by Kinger Lau.

The note was written with the MSCI China index at 54 – so it includes last week’s 11% gain.

They see high economic costs eating into the government’s resolve, with new data showing a surprise fall in October exports for China.

“Reported cases are increasing, but more signs of COVID policy easing became available after the Party Congress, and our economists expect China to start reopening in 2Q23 for political and public health,” they said.

Like the rest of the world, the Omicron variant has been tough on President Xi Jinping’s government, with cities representing 50% of the country’s economy under some restrictions since Nov. 4, Goldman points out. They estimate that the containment measures have caused China’s GDP to fall by 4 to 5% from trend levels.

And while U.S. markets are stuck on worries about Fed tightening, China may be keen to continue to stimulate to recover from its COVID troubles. The Hang Seng HK:HSI
has lost 29% so far this year, compared to a 20% decline for the S&P 500 SPX.

Goldman is also encouraged by the planned rollout of CanSino’s inhalable vaccine that sent Chinese stocks soaring a few days ago, and BioNTech’s BNTX.
vaccine that has been approved for foreign residents and could see its subsequent roll-out.

Goldman is also encouraged by more international flights to China and some high-profile global events scheduled for the second half of next year. If China meets a few conditions, such as higher vaccinations for the elderly and greater access to affordable and effective COVID pills, next spring could be when we see the big release of zero COVID rules.

As for what to invest in, Goldman sees the benefits of reopening for more for the offshore market than for A-shares, including the hospitality, restaurant and entertainment sectors. Sands China HK:1928,
Yum China HK: 9987

YUMC,
Trip.com HK:9961

TCOM,
HK Entertainment Galaxy: 27
and China Tourism Group Duty Free CN:601888
are among a few names they like.

The steps

ES00 Equity Futures

YM00

NQ00
are higher, with bond yields TY00

BX:TMUBMUSD02Y
slowing down with the dollar DXY.
CL Oil Price
are softer, while natural gas prices NG00
are significantly higher. In Asia, Hong Kong stores HK:HSI
led gains across the region.

The buzz

The bulk of the earnings news will come after markets close, when Take-Two TTWO,
ActivisionBlizzard ATVI,
ELEVATOR ELEVATOR,
TripAdvisor TRAVEL
and a few others will relate.

AAPL Apple
said it expects lower shipments of its iPhone 14 Pro and iPhone 14 Pro Max devices as COVID-19 concerns hamper production in China. Lower demand will also lead to 3 million fewer iPhones being produced, reports Bloomberg.

Thousands of workers at Meta META, the parent company of Facebook
could be fired as early as Wednesday.

CPI inflation and consumer sentiment are in the spotlight this week. For Monday, we’ll have consumer credit and an appearance from Richmond Fed President Tom Barkin to speak on inflation at 6 p.m. EST.

Lily: Why a Great Labor Shortage Adds to High Inflation in the United States

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Table

Watch out for new highs in the energy sector, says Larry Tentarelli, editor and publisher of the Blue Chip Daily Trend Report. Specifically, he looks at the SPDR S&P Oil & Gas Exploration & Production ETF XOP
which he notes hit a 20-week closing high on Friday.

“(XOP) is trending higher, above rising weekly moving averages, and could be gearing up for a test of new highs. This may be a volatile sector, as well as crude oil itself. same, so a near-term consolidation would not be unexpected. On any major pullback, I would like to see the 125-130 level hold,” Tentarelli told clients on his blog.

Stock tickers

Here are the most searched tickers on MarketWatch as of 6 a.m. EST:

Teleprinter	Security Name
TSLA	You’re here
EMG	GameStop
NIO	NIO
AAPL	Apple
CMA	AMC Entertainment
META	Metaplatforms
AMZN	Amazon.co.uk
MULN	Mullen Automotive
BBBY	Bed bath and beyond
DWAC	Acquisition of the digital world

Random plays

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A record number of Americans are moving to Mexico.

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