China markets soar on zero-COVID exit hopes
Easing of long-running pandemic controls drives share rally
HONG KONG -- Chinese markets soared on Monday, as major cities relaxed virus curbs and infections dropped from record highs, giving investors hope for an end to Beijing's zero-COVID policy.
Hong Kong's major indexes rallied. The Hang Seng Tech Index jumped 9.25%. The Hang Seng China Enterprises Index climbed 5.26%, while the broader Hang Seng Index rose 4.55%.
Ping An Healthcare and Technology led the surge in the closely tracked tech index, climbing more than 30%. Chinese electric vehicle maker Xpeng, video-sharing site Bilibili, software developer Ming Yuan Cloud and Alibaba Healthcare Information and Technology all traded at least 20% higher, Refinitiv data showed.
Mainland markets also ended higher on Monday. The SSE Composite Index, which tracks Shanghai stocks, climbed 1.65% while the CSI 300 closed up 1.96%. Shenzhen's SZSE Composite Index finished 0.88% higher. Finance, construction and cement issues led the mainland market rally. Foreign investors bought a net 5.89 billion yuan ($850 million) of mainland stocks on Monday.
Macao's beaten-down casino shares also got a big boost after earlier gains on new licenses issued to the gambling hub's six operators. MGM China surged by more than 20%, Wynn Macau finished the day 15.44% higher, Melco International jumped 15.15% and Sands China added 14.05%
The recovery came as investors bank on a China reopening after years of strict pandemic controls. Senior officials have signaled that the country entered a "new situation" with the less-lethal omicron variant.
Daily local infections were down to about 30,000 from earlier peaks above 40,000 a day. The caseload decline came as many Chinese cities lifted daily compulsory testing last week in the wake of nationwide protests against Beijing's virus-control regime.
Hao Hong, chief economist at Grow Investment Group, advised investors to "stay positive."
"China gradually reopens. Cases will surge, confusion will grow, and [the] market will be volatile. Stay positive," he wrote in a report titled "Farewell, zero-COVID," pointing to the historic performance of the Nasdaq Golden Dragon Index, which soared about 42% in November. The index is commonly used to gauge foreign investor sentiment in U.S.-listed Chinese stocks.
The significant changes in rhetoric in China about COVID is pushing a "rerating" on China equities, said Brian Tycangco, an investment analyst at Stansberry Research. "It appears the protests helped push the government to act sooner rather than later," he told Nikkei Asia.
"The recent COVID case numbers showed a decline, which is probably due to the existing restrictions placed to address the ongoing outbreak. It's encouraging the market to take on more risk in this severely beaten-down sector," Tycangco added, referring to the China tech sector.
Investors are pricing in a reopening in China in the second quarter of next year, he said.
Morgan Stanley upgraded its outlook on China equities in the MSCI China index to overweight from equal-weight, according to research published Monday.
Additional reporting by Grace Li.