China’s Covid-19 easing sends markets soaring, propels Hang Seng Index to its biggest one-day gain in 8 months

China’s Politburo Standing Committee will strive to reduce the impact of zero-Covid curbs on the economy, followed by a move to ease quarantine rules for arrivals
US consumer prices rose by the least since the start of the year, fuelling bets on easier tightening pace by the Federal Reserve going forward

Hong Kong stock market

Jiaxing Li

Published: 10:15am, 11 Nov, 2022

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Hong Kong stocks surged by the most in over eight months after China eased some of its Covid-19 restrictions and pledged to minimise the economic fallout from its policy. Slower US inflation raised optimism the Federal Reserve could temper its future rate increases.

The Hang Seng Index advanced 1,244.62 points or 7.7 per cent to 17,325.66 on Friday, the most since mid-March and taking this week’s gains to 7.2 per cent. The Tech Index soared 10.1 per cent, while the Shanghai Composite Index ended with a 1.7 per cent gain. An index tracking US-listed Chinese companies surged 7.6 per cent in New York overnight.

All but two of the 73 index members advanced. Tencent rallied 11.7 per cent to HK$258.40, while Alibaba jumped 12.4 per cent to HK$70.80. JD.com advanced 16.1 per cent to HK$192.50 and Meituan gained 12.5 per cent to HK$159.60. Macau casino operator Sands China and Galaxy Entertainment climbed 11.5 per cent and 8.3 per cent, respectively.

China slashed quarantine time for international arrivals to five days from seven beginning on Friday, plus a three-day home isolation, the State Council’s Covid-19 prevention team said. It plans to add more international flights, and will cancel the “circuit break” mechanism that has deterred arrivals.

“A gradual relaxation of measures would help to revive consumption activity and sentiment,” HSBC’s Greater China economist Liu Jing wrote in a note after the announcement. “The combination of a gradual relaxation of Covid-19 policies, further stabilisation in the housing market and continued policy support, should lead to a steady consumption recovery next year.”

Online travel agency Trip.com surged 17.3 per cent to HK$234.80. The company said searches for international flights to China tripled an hour after China’s relaxation announcement, while bookings doubled. Search volume has jumped by 122 per cent since October 31, the platform said in a statement.

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Earlier, China’s seven-member Politburo Standing Committee, chaired by President Xi Jinping, said on Thursday it would strive to reduce the damages caused by the “dynamic zero” policy, Xinhua News Agency reported. The policy, which has triggered snap lockdowns and hurt factory production, has been blamed for the malaise in the economy and stock markets.

“The latest comment from Beijing showed they want a more accurate [policy] execution to lower the impact on its economy, and that helped lift sentiment,” said Kenny Wen, head of investment strategy at KGI Asia in Hong Kong. The cooling inflation in the US is “very ideal”, he added.

Investors show what the end of zero-Covid will do to China’s stock markets

Speculation about the longevity of Beijing’s zero-Covid policy has caused wild swings in stock prices over the past week, even as China’s health officials continued to warn the curbs would stay as local infection cases jumped to multi-month high and lockdowns persisted in some mainland cities.

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Developer Longfor surged 29.1 per cent to HK$18.20, after it successfully tapped a loan guarantee programme backed by China’s central bank to support the beleaguered property industry. Country Garden soared by 35 per cent to HK$2.24, in the stock’s biggest single-day gain since it was listed in Hong Kong in 2007.

Separately, US consumer prices rose 7.7 per cent in October from a year earlier versus 8.2 per cent in September, the smallest increase since the start of the year. The slower-than-expected rise fuelled hopes the Fed will ease its tightening pace in the coming months.

Two stocks debuted on Friday. Glory View Technology, a smart city integrated service provider, surged 24.6 per cent to 50.01 yuan in Shenzhen, while e-commerce platform Zibuyu added 5.5 per cent to HK$8.29 in Hong Kong.

Asia-Pacific markets rose after the US inflation report. The S&P/ASX 200 in Australia jumped 2.8 per cent, the Nikkei 225 in Japan gained 3 per cent, while South Korea’s Kospi advanced 3.4 per cent.