Indices: China’s Shenzhen CSI 300 Index
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.
Chinas has become increasingly influential on the ASX of late as the volatility increases in the resources space – as we showed earlier it’s been a tough fortnight for the likes of copper and crude oil. After bouncing ~10% over the last few weeks Chinese stocks look poised for a breather before we will see if they have the support to recover more of their substantial losses since early 2021 – future statements from Xi Jinping are likely to be the determining factor as to what comes next.
Chinese equities keep falling ever lower as Xi Jinping appears far more focused on achieving Covid Zero as opposed to kickstarting their flagging economy. Value might feel on offer but if the country goes back into total lockdown it’s hard to know how much economic damage will be inflicted – well over 200 million people are already back in lockdown.
The picture for Chinese stocks is fairly similar short-term but we do like the risk/reward into fresh 2022 lows i.e. around 40% below its 2020 high and another ~10% below Friday’s close.
