Chinese Stocks Increased in Value

Chinese stocks surged on Monday after major Chinese cities loosened COVID-related restrictions, a promising development for an economy battling stringent virus measures for over two years.

The protest comes after Beijing and Shenzhen declared over the weekend that they would lift restrictions requiring commuters to present negative COVID test results before travel, despite a recent spike in COVID cases.

The Hang Seng TECH Index, representing the 30 largest Hong Kong-listed technology companies, rose 8% in Asian trade.

The increase builds on the index’s performance this quarter, which has gained about 20%. However, it is still in bear market territory, having lost approximately 27% year to date.

Bilibili gained more than 25%, Tencent gained 6%, Meituan gained more than 3%, Alibaba gained 8%, and Xiaomi gained more than 11%. Xpeng Electronic Vehicles gained 24%, outperforming the broader index, while Li Auto gained 12% and Nio gained more than 15%.

Hong Kong Indexes Rose

The Hang Seng index increased by 4%, while China’s CSI 300 index, which tracks the largest mainland-listed stocks, increased by nearly 2%.

China’s onshore and offshore yuan strengthened further, breaking through 7 per dollar for the first time since mid-September. Oil prices rose at the start of the Asian session, with Brent crude futures and West Texas Intermediate futures rising more than 2% on hopes of rising Chinese demand.

The latest change in China’s COVID regulations has also boosted investor confidence in further regional reopenings, including Macao’s casino sector. Hong Kong-listed casino operators also saw significant gains, with MGM China up 19%, Wynn Macau up 16%, and Sands China up 13%. Galaxy Entertainment increased by 6%, while SJM Holdings increased by more than 7%. Other consumer names gained as much as 15% in Hong Kong, including hotpot restaurant operator Haidilao, Tencent Music Entertainment, which gained more than 10% in morning trade, and Chow Tai Fook jewelry group, which gained 8%.

Travel-related stocks rose as well, with Cathay Pacific up more than 3%, China Southern and China Eastern Airlines up more than 5%, and Air China up 4%. Following the news that China is relaxing some of its COVID restrictions, Morgan Stanley strategists raised their recommendation rating for Chinese equities to overweight.

In a Sunday note, strategists led by Laura Wang stated that the upgrade marks the end of the firm’s equal-weight stance on Chinese equities, which it has held for 23 months, or nearly two years.

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