Shanghai’s reopening amplifies calls to ‘buy-the-bottom’ in China’s stock market

Investors are trying to get ahead of any good news in China, as the lifting of a lockdown in financial centre Shanghai eases pressure on a struggling economy.

A three-times leveraged China stock ETF saw a record volume surge on Tuesday and Wednesday, almost six times the daily average. Data on Monday showed overseas investors snapped up US$2.5 billion worth of Shanghai and Shenzhen shares last month and hedge funds look to have covered their short positions after being wrong-footed by a brief rally in mid-March.

The renewed interest in Chinese equities is helping fuel a nascent rebound from a bruising start to the year, when Covid-19 lockdowns exacerbated an already slowing economy. The CSI 300 Index of mainland shares has climbed 8 per cent from its late-April low, paring losses for 2022 to about 17 per cent.

That the gains have come in the face of disappointing economic data shows the desire of investors to be first in any sustained rebound, given how far stocks have fallen. While the nation’s strict adherence to zero-Covid continues to weigh on the outlook for Chinese markets, the easing of curbs in Shanghai after a two-month lockdown should spur increased activity.

“The second quarter marks the trough: Shanghai is reopening and the 33 stimulus policy measures are starting to kick in,” said Wendy Liu, chief Asia and China equity strategist at JPMorgan Chase in Hong Kong. “The reopen may also help investor sentiment because a good number of onshore analysts, traders and portfolio managers are based in Shanghai.”