SHANGHAI: China stocks surged and the yuan firmed past the closely watched 7-per-dollar level on Monday, both hitting their strongest levels since mid-September, as investors welcomed China’s easing of COVID-19 restrictions.
The blue-chip CSI 300 Index jumped 1.7% by the end of the morning session, while Hong Kong’s Hang Seng Index climbed 3.5%.
The upbeat mood aslo sent China’s yuan firming past 7 against the dollar in onshore and offshore markets.
Other Asian shares, meanwhile, extended their rally, as investors hoped a China reopening would eventually brighten the outlook for global growth and commodity demand.
More Chinese cities announced an easing of coronavirus curbs on Sunday, and there were also reports Beijing might lower the threat classification for COVID-19.
China stocks rise on property boost; Hong Kong slips as COVID weighs
“The China reopening trade maintained its strong momentum in the beginning of this week.
The positive headlines continued to fuel risk sentiment in China,“ said Ken Cheung, Chief Asian FX Strategist at Mizuho Bank. Morgan Stanley updated China equity to overweight, citing “multiple positive developments alongside a clear path set towards reopening.”
The Wall Street bank joined a slew of global institutions, including UBS and Goldman Sachs in turning bullish toward China after Beijing moved to “optimize” its anti-virus measures.
In mainland market, consumer staples rose 1.5%, transport companies jumped 3.1%, while infrastructure stocks soared 5%.
In Hong Kong, tech giants advanced 6.6% to lift the Hang Seng benchmark, and Macau casino operators surged 11.4% on expectations that China’s eventual reopening would boost their revenue.
“In the near term, the internet platform companies should fare better.
Intuitively, as cases soar, people will choose to stay home to minimize the contagion risks,“ said Hao Hong, chief economist of Grow Investment Group.
Nomura analysts also cautioned that “the road to reopening may be gradual, painful and bumpy”, although they “are are hopeful too”.
A private-sector business survey showed on Monday that China’s services activity shrank to six-month lows in November, as more COVID outbreaks and widening containment measures weighed on demand and operations.
Analysts warned of disruption to the consumption and manufacturing sector due to surging cases as China gradually eases COVID restrictions, which might further dent business activity in the near term.
“Rising cases will likely arouse confusion and thus chaotic expectations and market volatility,” Grow’s Hong said. “Longer-term outlook for the Chinese markets continues to improve.”
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