US-listed China stocks jumped on Friday as fresh optimism over an easing of Covid restrictions and progress in the American audit inspection of Chinese companies fueled appetite for beaten-down names.
(Bloomberg) — US-listed China stocks jumped on Friday as fresh optimism over an easing of Covid restrictions and progress in the American audit inspection of Chinese companies fueled appetite for beaten-down names.
The Nasdaq Golden Dragon Index closed 8.8% higher in a four-day rising streak.
The gauge advanced 17% for the week, erasing last week’s losses which were spurred by concerns over President Xi Jinping’s tightening control. Shares of internet giants Alibaba Group Holdings Ltd., Pinduoduo Inc., JD.com Inc.
and Baidu Inc. rose at least 7% each. Electric vehicle stocks NIO Inc. and Li Auto Inc. rallied 18% and 9.3% respectively.
These moves tracked a frenzied rally in their Hong Kong traded peers, which drove the Hang Seng China Enterprise Index to its best weekly performance since 2015.
The big reversal in China stocks follows days of speculation on the back of unverified social media posts that the country is preparing to ease its strict Covid Zero policy.
What’s more, Bloomberg reported that Beijing is working on plans to end a system that penalizes airlines for bringing virus cases into the nation, while the German Chancellor said China will make BioNTech SE’s Covid-19 vaccine available to foreign residents, the first approval of the mRNA vaccine in the country.
“Wall Street seems to believe it can’t get any worse for Chinese stocks and that we are a couple headlines away from seeing a major pivot on its strict Covid Zero policy,” said Ed Moya, senior market analyst at Oanda Corp.
“There was always an expectation that we were going to see a rally post China’s Party Congress.”
Moya also pointed to the audit inspection progress as “a pleasant surprise.” The shares “are benefiting on optimism the US audit went well and that we won’t have to see the worst case scenario play out with hundreds of companies delisting,” he said.
US audit officials completed their first on-site inspection round of Chinese companies ahead of schedule, Bloomberg News reported, offering investors a much needed sign of progress in the closely watched process to prevent the removal of hundreds of stocks from American exchanges.
READ: US Audit Inspectors Finish On-Site China Work Ahead of Plan (1)
Still, some fund managers and market strategists remain cautious about the nation’s equities.
Tiger Global Management, a long-time investor in China, has pulled back from the region and is pausing future stock investments, on concerns that geopolitical tensions and China’s Zero Covid policy are more likely to persist after the recent leadership reshuffle.
“If China eases its Covid restrictions, it will be bullish for the Chinese stocks over the short-term,” said Matt Maley, chief market strategist at Miller Tabak + Co.
“However, unless President Xi shows signs that he’s going to ease off on the crack downs they’ve engaged in on many different industries over the past two years, it will likely only be another bear market rally.”
–With assistance from Jan-Patrick Barnert and Taryana Odayar.
(Updates share moves and the chart at close)
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