/ world today news/ Capital markets in mainland China rallied on Thursday, driven by investor expectations for a strong recovery in consumption across a number of sectors, as more local authorities take more flexible and precise anti-epidemic measures.
The decision by some areas in the southern metropolis of Guangzhou on Wednesday to ease restrictions against COVID-19 had a surprise positive effect for mainland Chinese investors, while the US Federal Reserve’s signal to slow interest rate hikes also lifted market sentiment. At the close on Thursday, the benchmark Shanghai Composite Index rose 0.45 percent, the Shenzhen Component Index gained 1.4 percent and the tech ChiNext rose 1.53 percent.
Those gains marked a tangible positive start to the final month of 2022, after Chinese stocks already posted their biggest monthly gain this year on the benchmark Shanghai market, a development that observers attributed to expectations of a faster recovery.
The Shanghai Stock Exchange rose 8.91% in November, while Hong Kong’s Hang Seng rose 26.62%. Thursday’s gains in mainland China’s stock markets came as local authorities in a number of provinces and major cities began announcing more precise anti-epidemic measures and vowed to avoid large-scale lockdowns. In particular, Guangzhou, which has been hit by a relatively severe wave of COVID-19, lifted temporary restrictions in some regions and officially allowed close contacts who meet certain conditions to be quarantined in their homes rather than hotels.
At a briefing on Wednesday, officials in Beijing also announced plans to streamline testing services, stating that certain groups such as those studying and working from home are no longer required to take tests at 24 or 48 unless they don’t need to go out regularly.
After the optimization of the COVID-19 control measures, public facilities in some areas where there were outbreaks of the epidemic gradually began to open. Malls in Guangzhou’s Tienhu District have announced they will no longer require visitors to test negative within 48 hours, according to local media reports.
A number of shopping malls in Beijing, including Beijing Raffles City, also said they were reopening to visitors from Thursday, the Beijing Daily reported.
According to the popular restaurant chain Haidilao, more than 60 percent of its sites in Guangzhou have resumed operations, and others are actively preparing to do so.
The tourism sector has also shown signs of recovery in recent days. According to online tour operator qunar.com, demand for train tickets from Guangzhou has increased 2.5 times since the city lifted the temporary controls. Searches for the keyword “Guangzhou” also increased by more than 300 percent on domestic travel service platform Ctrip.
Shares of mainland Chinese liquor companies rose 2.62% on Thursday, with two of them breaching the daily limit of 10%.
According to experts, more precise control will further increase domestic consumption and investor confidence.
“As more people are able to go out and actually spend money, it is likely to boost consumption and economic development,” said Zhang Yi, chief executive of market research firm iiMedia Research Institute.
Dong Dengxin, director of the Institute of Finance and Securities at Wuhan University of Science and Technology, explains that more enterprises can resume operations with optimized production, especially in logistics and supply chain, which will boost business confidence. “Confidence will strengthen as investors will continue to be optimistic about future economic development, while the potential of sectors such as industrial production, restaurants, tourism, transport and others will be further activated,” he believes.
Market sentiment is also upbeat because of a signal sent by the U.S. Federal Reserve that it may soon slow rate hikes to fight inflation, observers said, citing an interview by chairman Jerome Powell with CNBC last Wednesday in which he confirmed that it sees the possibility of reducing the size of rate hikes as early as next month.
The yuan’s central parity rate against the U.S. currency rose 544 basis points to 7.1225 yuan per dollar on Thursday.
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