China’s reopening is a dominant theme as traders seek to end the rout
(Bloomberg) – If October was about the Communist Party Congress, the flavor of this month for Chinese stock markets is speculation around the reopening of the country.
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Shares rallied in the first two days of November as traders unhappy with months of losses found relief in unverified social media posts that signaled Beijing was planning to back away from its strict Covid Zero strategy. . Shares fell again on Thursday as China’s top health body reiterated its commitment to policy. A weak global backdrop given hawkish comments from the Federal Reserve did not help.
Even though Chinese officials gave no indication of a change in stance, the rumors sparked a sense of excitement among beleaguered investors who were looking for reasons to buy shares in one of the major underperforming markets. in the world.
A gauge of Chinese stocks traded in Hong Kong fell 3.5% on Thursday after a two-day advance of more than 8%. The Hang Seng index also lost more than 3%. Reopening-related stocks — including casinos and retailers — and technology, were among the market’s worst performers.
“The reopening bounce was bound to bring down air pockets without formal acknowledgment from party officials,” said Stephen Innes, managing partner at SPI Asset Management. Yet even after health authorities embraced Covid Zero, “investors are still thinking where there is smoke, there is fire. And will be looking for any subtle signs that reopening is being pushed.”
Li Ning Co. and Haidilao International Holding Ltd. plunged at least 3.5% each in Hong Kong, while a Bloomberg index of Macau casino stocks fell 3.1%. On the mainland, the CSI 300 index lost 0.8%.
Down 37% this year, the Hang Seng China Index is the worst performer among more than 90 global equity indicators tracked by Bloomberg. It capped a fourth consecutive month of losses in October.
The past two weeks have brought wild swings to Chinese markets – first with a historic rout following the political disappointment of the Communist Party Congress, then a sudden surge in the past two days, which has seen turnover of the world’s second-largest stock exchange to climb above the 1 trillion yuan ($137 billion) mark on Wednesday, the first time in about two months.
“The market is very short term oriented,” Thomas Fang, head of Chinese global markets at UBS Group AG, told Bloomberg Television, adding that Covid is “certainly one of the key areas” in the market.
All of this came even as China had shown little indication of changing its official stance on Covid, with the latest lockdown in the area around iPhone assembler Foxconn Technology Group’s main factory in Zhengzhou underlining that economic growth always takes precedence over controlling the pandemic.
“I think the market may be misinterpreting the pace of reopening because it can only come gradually like in Hong Kong, with reduced quarantine times probably as a first step,” said Marvin Chen, strategist at Bloomberg. Intelligence. “Local governments are still likely to adhere to Covid-Zero until broader measures are announced.”
–With the help of Charlotte Yang and Catherine Ngai.
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