Chinese stocks emerge as safe haven from bear markets globally, as US rate rise eclipses Shanghai lockdown as bogeyman

While the CSI 300 Index has risen almost 4 per cent in June, a decline in the Hang Seng Index is much smaller than the S&P 500’s

Reopening of Chinese economy bodes well for investors who can stomach short-term Covid-induced uncertainty: JPMorgan Asset Management

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The Lujiazui financial district in Shanghai. The CSI 300 has rebounded 12 per cent since hitting a two-year low in April on expectations that a lifting of Shanghai’s two-month-long lockdown and a slew of pro-growth measures will reverse a slowdown in the economy. Photo: EPA-EFE

Published: 7:30am, 17 Jun 2022Updated: 12:01pm, 17 Jun 2022

Chinese stocks, which were the least coveted equities just a few months ago under the double whammy of Beijing’s zero-Covid policy and regulatory crackdown, have emerged as a safe haven from bear markets globally.

With traders pulling out of risk assets to send the S&P 500 index and the MSCI World gauge into bear territory this week, China’s markets have held up relatively well. While the CSI 300 Index of the biggest Chinese onshore stocks has risen almost 4 per cent in June, a decline in Hong Kong’s Hang Seng Index is much smaller than the US benchmark’s, with technology juggernauts from Alibaba Group Holding to Meituan staging impressive rebounds.

The turnaround by Chinese stocks, which were the world’s worst performers not so long ago, amid lockdowns in Shanghai and 40 other Chinese cities, underscores the resilience of the world’s second-largest equity market to the global rout, after a flare-up in the pandemic was largely brought under control by Beijing and policy loosening to spur growth started bearing fruit. Meanwhile, fears of a recession have been heightened after the US Federal Reserve raised its target rate by 75 basis points on Wednesday, the most since 1994, to contain inflation.

“In the emerging world, we see growing opportunities in China and the Asian region,” said Kerry Craig, a strategist for global markets at JPMorgan Asset Management. “The reopening, albeit slowly, of the Chinese economy along with fiscal and monetary policy support at very low equity multiples, bodes well for longer term investors who may be able to stomach the remaining short-term Covid-induced uncertainty.”

The CSI 300 has rebounded 12 per cent since hitting a two-year low in April on bets pro-growth measures will arrest a slowdown in the economy. China’s key economic data for May showed recovery was strengthening as industrial production returned to growth, a decline in retail sales narrowed and fixed-asset investment met expectations.