The news would imply otherwise but reopening bets have propelled Chinese equities towards their best month in years i.e. the markets are saying when not if, will Beijing shift away from its economically damaging Covid-zero policy. The last 2-years have seen Chinese indices plunge over 40% under the weight of both a domestic property crisis and ongoing Covid restrictions. However, with 24 hours remaining Chinese stocks in Hong Kong are set for their best month since 2003 while the Yuan is set for its largest monthly advance in 4 years.
- The news flow may remain unsettling but traders have been increasing their bets that China is considering a Covid-zero exit plan.
The comfortable stance towards China is simple avoidance but we must remain mindful that the indices have already fallen significantly presenting plenty of opportunity for stocks to snap back aggressively on just hope as opposed to concrete news from Xi Jinping et al. China has started pushing elderly vaccinations and they reiterated that excessive restrictions should be avoided, it would appear that we may see some relaxations in policy soon but either way, stocks are optimistic when they look 6 months in advance.
- We are bullish towards the Shenzhen CSI 300 Index initially looking for an 8-10% upside advance but more wouldn’t surprise, a bullish read-through for the Australian Resources Sector.
