China’s zero-Covid policy to boost onshore stocks with market shielded from rout in US, Europe and Hong Kong

Name: China reports record 93 coronavirus cases in single day amid Delta outbreak
Uploaded: 2021-11-30T07:47:42.000Z
Duration: 1 min 44 s
Description: China reports record 93 coronavirus cases in single day amid Delta outbreak

The Shanghai Composite Index has lost only 0.6 per cent since the discovery of Omicron, while US and European stocks lost US$580 billion in market value

While Omicron is likely to eventually enter China, tough zero-Covid policy will block community transmission, top health official said.

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A woman walks on the street next to a large screen showing the Shanghai stock exchange data. Photo: EPA-EFE

Zhang Shidong

Published: 3:47pm, 30 Nov 2021

China’s zero-Covid policy may have helped shield the onshore market from the Omicron-induced rout that sliced about US$580 billion from benchmarks in the US and Europe. That’s likely to boost the local market as a safe harbour for investors.

Yuan-denominated shares have held their ground since Friday when the discovery of a new Covid-19 strain began to roil markets, knocking the S&P 500 Index down by 1 per cent and Europe’s Stoxx 50 Index by 4.3 per cent through Monday. Crude oil tumbled 14 per cent.

The Shanghai Composite Index fell 0.6 per cent in those two days, while the Hang Seng Index in Hong Kong retreated 3.6 per cent.

China has kept its borders shut to contain the pandemic in the toughest measures worldwide, which include massive testing, strict lockdown and rapid vaccinations. Strategists from Citic Securities to Guotai Junan Securities said the outperformance will boost the allure of onshore stocks and may accelerate purchases by foreign investors.

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China reports record 93 coronavirus cases in single day amid Delta outbreak

The zero-Covid policy is “a unique advantage of China’s economy”, said Qin Peijing, a strategist at Citic, the nation’s biggest brokerage. “The new virus strain will have a greater potential to dent the recovery of economies elsewhere than in China.” Local equities and government bonds will become more attractive to foreign investors.”

Meanwhile, optimism on overseas stocks has waned, according to Credit Suisse. A pullback in stocks has seen global investors flocking to bonds as a hedge against risk associated with the Omicron variant, said Michael Strobaek, its global chief investment officer.