Chinese Stocks Rise After Top Officials Signals Softer COVID Posture

  • Deputy Prime Minister Sun Chunlan said the epidemic in China was in a “new phase” with new tasks.
  • Sun’s words carry weight as he is the face of China’s strict Covid-zero approach.
  • Hong Kong and Chinese stocks rose on optimism that China is exiting its Covid-zero policy.

Hong Kong and Chinese stocks rose on Thursday after a top Chinese official overseeing the country’s management of the pandemic softened the country’s strict Covid-zero approach.

According to an official government statement, Deputy Prime Minister Sun Chunlan said while speaking at a meeting of the National Health Commission on Wednesday that the epidemic in China is now in a “new phase” with new mandates.

He said this is because the Omicron variant has a reduced ability to cause disease and more people are being vaccinated. He added that China is also becoming more experienced in the prevention and control of COVID-19.

Yeap Jun Rong, a market strategist at online trading platform IG on Thursday, seems to be hinting that “some plans are underway to reopen next year.”

Sun’s softening on China’s brutal Covid-zero stance carries weight as it is seen as the face of the hardline approach. The change is also significant, as it followed rare public protests in China last weekend against the country’s relentless COVID-19 restrictions, following a three-year pandemic.

Hong Kong’s Hang Seng Index rose 1.6% at midday, while Hang Seng China Enterprises rose 1.25%. Shanghai Compound gained 0.65%.

China, the world’s second-largest economy after the United States, is under pressure from pandemic restrictions, which is now in its third year. Economic activity contracted in November, while official indicators for China’s manufacturing and services activity shrank from a month ago amid a record increase in COVID cases.

“Rising Covid cases, along with declining exports, have increased the pressure on exporters,” Dutch ING bank economists wrote in a note on Thursday. “Local government officials will likely implement Covid measures to mitigate their impact on the economy, even if there are no recent changes to the general Covid rules.”

Aside from optimism about the potential reopening of the Chinese economy, equities elsewhere in Asia were also bolstered by Federal Reserve chief Jerome Powell, who on Wednesday signaled that the central bank would slow the rate hike cycle in December.

Japan’s Nikkei 225 closed 0.9% and South Korea’s Kospi 0.3%. Sensex in India was up 0.5% last at 2.24 EST.

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