China Stocks Climb Again; Investors See More Benefits Than Risk In Covid Policy Shift

Stock rallies that have generated double-digit gains in China and Hong Kong benchmark indexes since the end of October continued on Friday as investors embraced hope that Beijing’s abrupt easing of zero-Covid policies will bring more economic good than harm.

The CSI 300 index closed up by 1% to 3,998.24, its best close since Sept. 15; the China benchmark index has gained nearly 14% since Oct. 31. The Hang Seng Index on Friday rose by 2.3% to 19,900.87, its best close since Aug. 31; it has soared by 35% from the end of October.

Among individual gainers, China Internet heavyweight Tencent on Friday closed at its highest level since early September, gaining 2.6% to HK$325.60. The stock has shot up by more than 60% since Oct. 28, adding $11 billion to the fortune of CEO Ma Huateng, China’s third-richest man. Ma was worth $35 billion on the Forbes Real-Time Billionaires List today.

The country’s unpopular zero-Covid testing rules are winding down after rare public protests in major cities last month, weakening economic growth, and complaints by foreign business groups. Violent protests tied to pandemic measures and a labor dispute at a massive iPhone plant in Zhengzhou run by Taiwan-headquartered Hon Hai Precision have reinforced pressure on multinationals to diversify supply chains from the country. (See related post here.) Hon Hai itself announced a new $500 million investment in India this week.

“Some believe the pull back on zero-Covid is a reaction to public protests,” China-based American lawyer and former American Chamber of Commerce in China chairman James Zimmerman said in a Tweet this week. “I disagree. With censorship, most people have been unaware of ongoing protests. It’s all about a bleak economic outlook and a frantic effort to drive a tanking economy before it sinks even further.”

Economic growth in the country will rise to 5% to 6% next year from approximately 3% this year, PwC China senior economist G. Bin Zhao said on Thursday at a conference in Shanghai organized by Forbes China, the licensed Chinese-language edition of Forbes. Consumer spending will help lead the way, he predicted. (See related post here.)

Real estate stocks battered by oversupply and debt continue to recover following government support for the industry last month. Guangzhou R &F, led by billionaire co-chairs Li Sze Lim and Zhang Li, rose by 19% to HK$2.52 on Friday, its highest level in half a year. Its shares are still down by 37% in the past 12 months.

Among the Covid-related risks going forward, experts say, are a spike in cases in the winter flu season that depresses consumption, an increase in deaths that creates new political backlash, and an overwhelmed healthcare system.

For now, at least, upbeat bidders are in the driver’s seat at the country’s stock exchanges.

See related posts:

iPhone Maker Wistron Warns Supply Shifts Face Talent, Parts Obstacles

China GDP Growth Poised To Outperform World Average In 2023 — PwC

Global Supply Chain Shocks Open Room For U.S.-Taiwan Business Ties

U.S. Companies In China Worried Covid Surge Will Damage Prospects After Upbeat G20 Meeting

@rflannerychina