China markets gained on Wednesday, boosted by evidence of decreased domestic COVID-19 infections and US President Joe Biden’s decision to reconsider Trump-era tariffs on Beijing. By the end of the morning session, the CSI300 index had risen 2% to 4,000.00 points, while the Shanghai Composite Index had risen 1.6 percent to 3,085.43 points. The Hang Seng index is now at 19,971.18 points, up 1.7 percent. The Hong Kong China Enterprises Index increased by 2.4 percent to 6,818.91 points. Shanghai said on Wednesday that half of the city has reached “zero-COVID” status, although national legislation mandated that severe limitations stay in place. Meanwhile, the number of new cases reported in Beijing has decreased to its lowest point since April 26.
Lifting market sentiment further, China’s producer prices rose at the slowest pace in a year in April, despite the surge in global commodity costs, leaving room for more stimulus to shore up the flagging economy. Risks affecting China’s onshore market are controllable, and the market has a solid foundation for stable operation, the official CCTV reported on Tuesday, citing a securities regulatory official.
The head of the World Health Organization said on Tuesday that China’s zero-tolerance COVID-19 policy is not sustainable given what is now known of the virus. “Over the past week, the COVID situation has continued to improve at the national level,” said Nomura in a note. “However, the turning point for economic fundamentals and most financial assets in coming weeks (or months) depends mainly on Beijing’s stance on zero-COVID strategy instead of daily cases.”
Biden, under pressure to tame high inflation, said he was considering eliminating Trump-era tariffs on China as a way to lower prices for goods in the United States. China equities could be approaching the late stage of a bear market, but the potential final leg is likely to be bumpy, Morgan Stanley strategists said in a note.
The bank expected near-term market volatility to remain elevated, citing China’s COVID situation, geopolitical tensions, global macro slowdown, and monetary tightening. Semiconductors and new energy firms jumped more than 5% each to lead the gains, while shares in healthcare, tourism, and machinery went up between 3.5% and 4.4%. Tech giants listed in Hong Kong climbed 4.6% to lift the Hang Seng benchmark, with index heavyweights Meituan and Tencent up 8.2% and 4.4%, respectively.
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