Here’s Why Chinese Stocks Rebound This Week

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Last Updated on November 4, 2022 by Bitfinsider

This week, Chinese stocks rose as investors anticipated Beijing will soon loosen its strict Covid policy.

The Shanghai composite index increased by 5% last week. The Hang Seng Index had weekly gains of more than 8%, rebounding from 13-year lows seen in the previous two weeks.

The Chinese government has not yet officially announced any policy changes. Covid-related travel restrictions, regular virus testing procedures, and other safeguards were as stringent as ever.

However, Friday’s stock market rise was spurred by various unverified rumors of an impending Covid policy shift.

Zhang cited a Friday morning closed-door statement by the top scientist of the Chinese Center for Disease Control and Prevention as evidence that a shift away from the zero-Covid policy could be imminent.

Cailian Press, a Chinese financial media outlet, said that officials would conduct a press conference at the National Health Commission building on Saturday afternoon to discuss viral control and prevention efforts.

The limits and recurrent Covid outbreaks have continued to be a drag on China’s economy, which grew by only 3% in the first three quarters of the year compared to the same period last year. Economists have lowered their GDP projections for next year because to the belief that the restrictions will continue, whereas the rest of the world has adopted a “live with Covid” attitude.

Monday marked the conclusion of a period of increased Covid restrictions owing to the Mid-Autumn Festival in September, the National Holiday in early October, and the 20th National Congress of the ruling Chinese Communist Party in late October.

This week, official descriptions of Covid contained prominent references to the virus’ “self-limiting” and manageability.

However, the People’s Daily, the journal of the Chinese Communist Party, insisted that isolation was still required.

In addition, the National Health Commission affirmed its adherence to what is formally known as the dynamic zero-Covid policy.

“The strongest signal has been transmitted. In the near future, China will maintain its unwavering dedication and zero-tolerance policy, pursuing zero-Covid as one of the strongest virus elimination regimes in the world, according to Bruce Pang, chief economist and head of research for Greater China at JLL.

In the other hand, “on the long run, China is projected to continue making its Covid response more scientific and targeted, resulting in a more flexible policy attitude, flexible measures, and gradually looser limitations,” he said.

Pang anticipates that the regulation will not be repealed until at least the end of June 2023.

This week’s market speculations have supplied no new information regarding the timing of upcoming changes.

Zhang of Pinpoint said that a lunchtime Bloomberg report, citing sources, that suggested U.S.-listed Chinese stocks such as Alibaba could remain listed on U.S. exchanges also contributed to Friday’s stock rise.

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