Chinese equities sparked a global rally in stocks last week on hopes the end of their Zero COVID policy was coming to an end.
Optimism around initial rumours on social media China were preparing a dedicated committee to end the policy built momentum last the week. Reports the Chinese authorities had also approved a new inhalable vaccine added to the positive mood.
This culminated in surging equities in Hong Kong on Friday and a sharp rally in China-focused equities globally.
However, over the weekend, Chinese officials moved to dampen any hopes of a broad reopening saying they would push on with their zero-COVID which includes lockdowns and strict quarantine measures.
There continues to be a higher number of COVID cases in China and there were fresh lockdowns and restrictions over the weekend.
Chinese equities
There was a brief period of negative trading in Chinese stocks overnight but this was quickly bought into with Hong Kong’s Hang Seng closing 2.5% higher on the day.
Despite Chinese official throwing cold water on an immediate end to their strict controls, there is an expectation building in markets that China will soon scrap the policy and Chinese demand will return before long.
“With China going into winter, most analysts think a change in zero-COVID is unlikely until at least March,” said said Tapas Strickland, head of market economics at NAB.