Asian stock market sees a rebound despite growing lockdowns in China
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Shares across Asia rebounded earlier today due to investors’ hopes that China will not increase its COVID-19 restrictions and will instead reopen the economy. Whether or not this will actually happen is debatable, considering that the country has seen a surge in COVID cases and, therefore, lockdowns as well. The situation led to China’s factory and services sector activity drop. However, investors seem to be hopeful.
In addition, Wednesday has also brought expectations of Wall Street and European markets also opening higher, with E-mini futures and FTSE futures for the S&P 500 index on the rise. So far, Asia Pacific stocks outside Japan have seen a significant change in trend, going from losses to 0.67% gains as of early November 30th. The current levels already indicate that the index will see its highest monthly gains since April 1999.
The same is true for China’s benchmark CSI300 Index, and Hong Kong’s Hang Seng Index. CSI300 bounced up by 0.1%, while Hang Seng Index bounced back by 0.82%. This happened despite a survey that revealed China’s factory activity contracted, as investors simply chose to ignore these reports, for the most part.
Uncertainty caused by COVID-19 is still strong in China
According to Redmond Wong, the Greater China market strategist at Hong Kong-based Saxo Markets, the investors are willing to look past the developments seen in November. Wong further noted that the impact on the economy from the supportive measures to the real economy — such as China’s property sector — will emerge gradually.
Wong also noted that the country decided not to harden its COVID measures, at least for now, even though there was a significant surge in cases, plus protests throughout the country. Instead, the country decided to take a new approach and fine-tune its policy. The investors see this as a very encouraging development.
As part of this, China’s officials now plan to speed up the vaccinations for elderly citizens, which it views as crucial in order to finally be in the position to start unwinding almost three years of strict curbs that have hit its economy, which is second-largest in the world. Of course, after such a long period, the country has experienced the erosion of its economic growth — not to mention the disruption of millions of lives.
According to most analysts, China’s reopening is going to be slow, bumpy, and it will weigh strongly on its economy in 2023. The headlines regarding the local COVID measures are still deeply troubling to investors, and while easing some of the measures are being considered — this might not be enough to prevent even further disruption of China’s economy.
