China’s easing of zero-Covid restraints set to release stocks into bull-market territory for first time in three years

Name: Students in Beijing return to class as Covid-19 wanes in Chinese capital
Uploaded: 2022-06-29T06:36:10.000Z
Duration: 2 min 1 s
Description: Students in Beijing return to class as Covid-19 wanes in Chinese capital

A change in quarantine rules comes as the CSI 300 Index is within less than 3 per cent of bull-market status after an 18 per cent rebound from an April low

However, analyst opinion remains mixed about how heavily Beijing’s zero-Covid policy will continue to weigh on the market

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A change in quarantine rules comes as the CSI 300 Index is within about 2 per cent of bull-market status. Photo: EPA-EFE

Zhang Shidong

Published: 2:36pm, 29 Jun 2022Updated: 2:55am, 30 Jun 2022

China’s incremental relaxation of its gruelling zero-Covid policies could fuel a run-up that drives stocks into bull-market territory for the first time since early 2019.

Beijing’s move to halve the quarantine period for inbound travellers may be a sign that the nation will gradually scrap the zero-Covid approach after a Communist Party leadership reshuffle due to take place in the autumn, according to Morgan Stanley. Meanwhile, DBS Group said that the relaxation reduces the risk of large-scale lockdowns, which have affected more than 40 cities including Shanghai so far this year.

The quarantine change announced on Tuesday – the first such easing since the outbreak of Covid-19 in 2020 – comes as the CSI 300 Index is within about 3 per cent of bull-market status after a 17 per cent rebound from an April low. Still, traders fret about the sustainability of the bounce-back because of policy uncertainty.

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Students in Beijing return to class as Covid-19 wanes in Chinese capital

“There’s some conviction among the market that China will be back onto the track of having economic growth as the core,” said Tao Yifei, a fund manager at HFT Investment Management in Shanghai. “From the recent policy tones, we have seen the efforts by the government to revitalise the economy, and that has improved expectations.”

Chinese stocks have recently become a haven for global investors after Shanghai lifted a two-month lockdown on June 1 and top policymakers unveiled a slew of measures to spur growth, including a cut in mortgage rates and tax breaks on purchases of electric cars.

The CSI 300 slipped 1.5 per cent to 4,421.36 on Wednesday, reversing the 1 per cent it gained the previous day when Beijing announced it would slash the quarantine period to seven days and standardise testing procedures in regions that report infections.

A further 2.7 per cent gain would take the gauge into bull-market status, which is defined as a 20 per cent rise from a low by some technical traders. It would be the first time the CSI 300 entered bull-market territory since early 2019.

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