(Bloomberg) -- Chinese stocks listed in the US rose on Monday amid optimism that nationwide protests could hasten the government's shift away from the Covid Zero policies that are exerting a major drag on its economy.
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The Nasdaq Golden Dragon China Index closed up 2.8% after earlier rising as much as 4.7%. Stocks that stand to gain strongly from an end to virus-related lockdowns helped to drive the advance, including online travel agency Trip.com Group Ltd and hotel operator H World Group Ltd.
E-commerce firm Pinduoduo Inc. rallied 13% after better-than-expected earnings, while Internet giants Alibaba Group Holding Ltd. and JD.com Inc. rising after slumping in Hong Kong. KE Holdings, a platform that facilitates housing transactions, also gained as China's securities regulator issued new measures to support listed housing developers.
Protesters took to the streets across China over the weekend in a rare act of defiance against the government and its landmark strategy of lockdowns and mass testing to contain the Covid-19 pandemic.
"This will likely accelerate reopening" even though "there will be no official end to zero Covid," Brendan Ahern, chief investment officer at Krane Funds Advisors wrote in a note to clients.
The gains stand in contrast to trading in Asia, where Chinese stocks slid Monday, as well as the broader US market, which slid in part on concerns about how the unpredictable fallout in China could affect the growth outlook.
The civil unrest comes despite Beijing's loosening of some Covid restrictions earlier this month, fueling gains in the Chinese stock market. The MSCI China Index is on pace for its best month this century after gaining nearly 19% in November, though it remains down sharply this year as investors wait for a clear signal that Beijing is softening its zero-tolerance stance toward the pandemic.
While China's government has deflected questions about the unrest, some localities -- including the capital city of Beijing -- have been paring back restrictions despite surging Covid cases. A local official in the capital said movement restrictions imposed to trace the source of Covid or identify those infected generally must not exceed 24 hours. Meanwhile, Xinjiang said it will lift lockdowns of designated high-risk areas as soon as possible.
These policy tweaks aside, some analysts said protests are unlikely to spark a U-turn in the country's reopening playbook. "A better vaccine or booster is a must-have for real reopening to take place," said Neo Wang, Evercore ISI managing director for China Research.
Yet with the country's virus caseload spiking and signs of public discontent boiling over, Goldman Sachs Group Inc. economists said China could face a "disorderly" exit from its Covid Zero policies. Mark Mobius, founding partner at Mobius Capital Partners, echoed such caution in an interview with Bloomberg Television, saying in an interview Chinese markets could retreat in the near term if Beijing cracks down on protesters.
Although the social tension may help accelerate China's reopening, "it is undeniably adding another layer of uncertainty for the Chinese market at the moment when most of the investors are re-calibrating their positions in preparation for 2023," said Xiadong Bao, a fund manager at Edmond de Rothschild Asset Management in Paris.
--With assistance from Yiqin Shen and Lynn Chen.
(Updates with share moves at close and details throughout)
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