Chinese stocks listed in the US rallied Monday amid speculation that nationwide protests could hasten the government’s shift away from the Covid Zero policies that are exerting a major drag on its economy.
(Bloomberg) — Chinese stocks listed in the US rallied Monday amid speculation that nationwide protests could hasten the government’s shift away from the Covid Zero policies that are exerting a major drag on its economy.
The Nasdaq Golden Dragon China Index jumped as much as 4.7%, the most in two weeks, while the exchange-traded KraneShares CSI China Internet ETF advanced as much as 5.5% in New York.
Stocks that stand to gain strongly from an end to virus-related lockdowns helped to drive the advance, including restaurant operator Yum China Holdings Inc. and online travel agency Trip.com Group Ltd.
E-commerce firm Pinduoduo Inc. rallied 14% after better-than-expected earnings, while Internet giants Alibaba Group Holding Ltd. and JD.com Inc. also gained after slumping in Hong Kong. KE Holdings, a platform that facilitates housing transactions, jumped 4.7% 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 campaigns 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 in the US stand in contrast to trading in Asia Monday, when Chinese stocks slid on concern about the fallout from the protests.
The civil unrest comes even after Beijing loosened some Covid restrictions this month in a surprise move, 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.
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 Lynn Chen.
(Updates with share moves, quote in the fifth graph and details throughout)
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