SHANGHAI: Hong Kong and Chinese stocks extended their rally on Monday, as investors desperate for good news doggedly held their bets on an eventual economic reopening, despite Beijing’s reaffirmation of its strict COVID-19 policies over the weekend.
Markets also cheered President Xi Jinping’s commitment to economic growth and opening-up at the Shanghai International Import Expo, where the Chinese securities regulator vowed to attract more foreign capital. The Hang Seng index jumped 3.4% by the lunch break, following its best week in a decade.
Hong Kong’s tech Index surged 4.7%, after posting its biggest weekly gain ever of 16%. Mainland gains were more constrained with both the bluechip CSI300 index and the Shanghai Composite Index up just 0.5%.
Chinese health officials said on Saturday the country would maintain its “dynamic-clearing” approach to COVID-19 cases as soon as they emerge, dashing hopes for a quick reopening of the economy that had fuelled last week’s epic gains.
However, the same officials criticised some regions for their “one-size-fits-all” lockdowns and vowed to fix such shortcomings, giving investors further cause for optimism.
“Overall, we think China is on the track to relax its control though it may be still months away from an eventual pivot,” Tommy Xie, OCBC Bank’s head of Greater China Research said in a note, pointing to positive developments in the past week.
Goldman Sachs said in a note to clients on Sunday that Chinese stocks could rally 20% on and before the reopening, as equity markets tend to respond about a month in advance of policy changes and the positive momentum typically lasts for two-three months.
The strands of reopening hope helped investors shrug off data that showed China’s exports and imports unexpectedly falling in October, the first simultaneous slump since May 2020.
“I expect export growth to remain weak in the next few months as global economy slows,” wrote Zhiwei Zhang, President of Pinpoint Asset Management, adding “I think there are early signs that the zero COVID policy may be relaxed down the road.”
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Investors, who had worried that China could prioritise ideology over pragmatism and growth during Xi’s third leadership term, were also soothed after the president said Beijing would work with all countries and parties to share opportunities from economic opening-up.
Also during the International Import Expo, Fang Xinghai, vice chairman of China’s securities regulator, said the country would continue to open its capital markets and introduce more foreign institutional investors.
Stocks rose across the board in Hong Kong with Chinese property firms listed in the city jumping 6%, after last week’s 9% gain.
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