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Chinese Stocks In Hong Kong Record Best Week Since 2015 Amid Fresh Optimism For Easing Covid Restrictions

Tyler Durden's Photo
by Tyler Durden
Friday, Nov 04, 2022 - 11:32 AM

Chinese stocks soared (again) on Friday as speculation mounts the bottom has finally arrived after nearly two years of declines and $6 trillion in market cap wiped out. The frenzy was sparked earlier this week on unverified social media posts indicating Beijing could be preparing to exit the strict Covid zero policy. There's a flurry of new market-friendly headlines adding fuel to the rally.

Chinese stocks in Hong Kong soared on reports that the Communist Party newspaper, the Global Times, said local government officials were instructed not to impose excessive restrictions to curb Covid infections, according to AP News. 

The Global Times said the Chinese National Health Commission had asked local governments to curb Covid outbreaks but use the "minimum scale affected, and the shortest time and lowest cost possible" -- opposed to lockdowns that cripple the economy. 

Rumors continue to circulate around Beijing's plans to relax certain Covid restrictions: 

In more good news, Bloomberg reported Beijing is working on plans to dump a system that punishes airlines for bringing virus cases into the country. This could be another sign Covid zero policies are set to ease: 

  • CHINA MAY SOON SHORTEN QUARANTINE RULE FOR INBOUND TRAVELERS FROM 10 TO 7 OR 8 DAYS - SOURCES

All the chatter this week of Covid zero pivot rumors and reports today in state media about the possibility of easing restrictive policies has left some investors no choice but to pile into China stocks (which have some of the world's lowest valuations). 

"No one wants to be late to the China re-opening party," said Stephen Innes, managing partner at SPI Asset Management.

The Hang Seng China Enterprises recorded its best weekly gain since 2015.

Hang Seng Tech index jumped as much as 8.5% today. 

Bloomberg also reported more welcoming news: "US audit officials were ahead of schedule in on-site inspections of Chinese companies."  

US-listed Chinese stocks moved higher premarket on all the news. Alibaba Group Holdings Ltd. shares are up nearly 10%, JD.com Inc. gained 10%, and Baidu Inc. climbed 8%. in premarket trading. 

The Nasdaq Golden Dragon Index of 65 Chinese stocks moved higher this week, up about 7.5% in the last three sessions. It crashed last week to its lowest levels since 2013 on President Xi Jinping's third-term fears of consolidated power. 

Looking ahead, a Covid prevention and control panel led by China's State Council will hold a briefing at 3 pm Saturday. This could lead to more clues about the fate of the Covid zero policy. 

And let's not forget JPMorgan's strategist Marko Kolanovic recently urged investors to buy the dip in China. 

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