(Bloomberg) — Chinese stocks rallied again as the easing of some domestic travel rules further boosted prospects for the nation’s economic reopening.
Shares of hotel operators, airlines and airport operators were among the big gainers in the market on Thursday.
The optimism, along with data showing an improvement in the official manufacturing purchasing managers index for May, saw the benchmark CSI 300 Index climb 1.4%. It has risen in five of the last six sessions.
China’s industry ministry scrapped putting an asterisk on people’s travel-history cards if their records in the previous 14 days included cities designated as medium or high Covid-risk areas.
Some local governments used to impose curbs on visitors with the asterisk. Separately, a report said Shanghai will gradually open museums, art galleries and tourist attractions starting July 1.
“We expect the pace of activity normalization will gain more strength in coming months, thus stabilizing the growth momentum,” said Banny Lam, head of research at CEB International Investment Corp.
“Positive growth outlook enhances investors’ optimism, thus leading to upswing of equity market.”
The latest developments follow China’s decision earlier this week to reduce quarantine times for inbound travelers by half, the biggest shift yet in its Covid-Zero policy.
Optimism is thus rising that the nation is moving away from the strict stance that has weighed on growth and consumption, and also clouded the outlook for equity investors.
Huatian Hotel Group Co.
surged 10% while China Tourism Group Duty Free Corp. ended with a 6.3% gain. China Eastern Airlines Corp. rose 3.6% and Guangzhou Baiyun International Airport Co. jumped 5.4%.
A sub-gauge of consumer staples stocks climbed 2.1% to close at its highest since Jan.
10.
Bull Market
The CSI 300 jumped 9.6% in June to cap its best monthly gain since July 2020. Up about 19% from an April 26 low, the gauge is close to entering a technical bull market.
The rally has come against the backdrop of a slump in global stocks, as the Chinese central bank’s loose monetary settings set it apart from the Federal Reserve and many other major peers that are rapidly raising interest rates to curb inflation.
Beijing’s dialing back of a crackdown on the key technology sector has also lifted sentiment.
READ: China Rally Stands Out as Global Stocks Fret Over Fed Hikes
“Chinese regulators have been consistent in their messaging: first announcing that the crackdown on tech was largely done, and then relaxing Covid measures,” said Manish Bhargava, a fund manager at Straits Investment Holdings Pte.
“If the new guidelines prove to perform well in containing Covid, removing extra restrictions could follow, which could reduce the economic costs of a Covid Zero regime.”
To be sure, President Xi Jinping declared Covid Zero the most “economic and effective” policy for China earlier this week during a symbolic visit to Wuhan.
China would rather endure some temporary impact on economic development than let the virus hurt people’s safety and health, he said, in remarks reported Wednesday by state media.
“The longer-term market performance will be heavily dependent on economic fundamentals and whether there will be further adjustment to policies on Covid measures.” said Rebecca Lim, founder of AutoML Capital Ltd.
in Hong Kong.
READ: China’s Shock Covid Shift Adds Fuel to World-Beating Stock Rally
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