Chinese Stocks May Extend Rally as Beijing Softens Covid Stance

  • In Business
  • 2022-12-01 00:25:29Z
  • By Bloomberg

(Bloomberg) -- Chinese stocks may track their US peers higher, after a briefing by top health officials pointed to a further move away from Covid Zero and bolstered reopening optimism.

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The Nasdaq Golden Dragon China Index soared 9.6% on Wednesday, taking its gain for November to 42% and adding $205 billion in market value. Bilibili Inc., Inc. and Pinduoduo Inc. were among the biggest gainers in the month, advancing at least 49% each. The surge in the gauge was a dramatic turnaround from October's 25% plunge, and tracked the historic move in Hong Kong peers.

A broad risk-on mood on Wednesday also lifted the benchmark, as Federal Reserve chair Jerome Powell signaled a likely slowdown on interest rate hikes, sending the tech-heavy Nasdaq 100 Index higher by 4.6%.

"It is clear that the authorities are setting the stage for Covid measures to be relaxed," said Justin Tang, head of Asian research at United First Partners. "Equity prices will see a boost as China joins the rest of the world in living with Covid."

Market sentiment has notably improved as investors see more certainty related to China's reopening trends, increased policy support for the battered property sector as well as strong quarterly earnings results from some of the nation's biggest tech companies while their valuations remain depressed.

In a fresh sign of potential policy shift, China's top official in charge of the fight against Covid-19 said the combat against the virus is at a new stage with the Omicron variant weakening and more Chinese citizens getting vaccinated. Wednesday's remarks appeared to be the first official acknowledgment that the virus is no longer as severe. On Tuesday, authorities said they will bolster vaccinations among senior citizens, while also warning against any excessive control measures.

Read more: China Sees New Phase of Covid on Weaker Omicron, More Shots

Meanwhile, China is now mulling the roll out a fourth Covid shot, according to people familiar. Guangzhou, a southern manufacturing hub, lifted lockdowns in most parts of the city and replaced those with targeted restrictions. While the city is home to Apple Inc.'s largest manufacturing site in China, Zhengzhou, also lifted a lockdown of its main urban areas put in place five days ago.

The shift has spurred hopes that China is laying the grounds for an eventual Covid Zero exit, prompting traders to place bets even as a spike in infections and the reopening timeline remains highly uncertain.

Still, the Nasdaq Golden Dragon China Index is 26% lower this year, with some bumpy rides and more volatility expected.

--With assistance from Yiqin Shen and Charlotte Yang.

(Updates lead and adds quote)

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