Asian stocks jumped higher and the price of crude oil rose on Monday, as investors increased their bets that China would reopen to the world early next year after Beijing eased its growth-dampening zero-Covid policies.
Hong Kong’s Hang Seng index climbed as much as 4.5 per cent and has risen more than 17 per cent in the past month, while China’s CSI 300 index added 2 per cent after several cities across the country relaxed antivirus measures. Top movers in the latter included China Railway Group and infrastructure group China Communications Construction, both of which gained more than 10 per cent.
A measure of the dollar against six other major currencies traded in a tight range. The renminbi rose almost 1 per cent against the greenback to Rmb6.955 per dollar, the highest level since September.
In commodities markets, oil prices gained on the prospect of increased demand from China, with Brent crude, the international benchmark, up 1.9 per cent at $87.24 a barrel.
“Investor confidence in China-related assets and currencies is being boosted by reopening optimism,” said MUFG currency analyst Lee Hardman, who added that the dollar remained “vulnerable” to further weakening even after slipping more than 8 per cent from its late September high.
China reported 31,824 infections on Sunday for tests taken the previous day — a slight decline from Saturday, but close to record highs. “A surge in Covid cases as China reopens still has the potential to cause disruption for the economy and dampen activity in the near-term,” Hardman warned.
China has been rocked by widespread demonstrations in recent weeks, with people taking to the streets in protest against President Xi Jinping’s draconian measures to slow the spread of Covid-19.
Xi appears to have acquiesced, with cities including Shenzhen and Shanghai having scrapped the requirement for commuters to present PCR test results to travel on public transport, following similar moves by Tianjin, Chengdu and Chongqing. Signs that the world’s second-biggest economy is moving into a new phase in its fight against Covid have encouraged some investors to pile into Chinese assets that would benefit from a reopening.
Others had retreated at the same time, however. Uncertainty over China’s Covid policies and “the difficult economic backdrop contributed to risk-averse behaviour by investors”, noted analysts at Goldman Sachs, who called the pullback “excessive” and remain optimistic that investors should be positioning for a reopening in April.
Elsewhere in equity markets, Europe’s regional Stoxx 600 were steady despite data out on Monday showing a 1.8 per cent fall in eurozone retail turnover in October — the biggest monthly fall of the year. London’s FTSE 100 rose 0.3 per cent.
US equities have marched steadily higher over the past fortnight on hopes that the Federal Reserve would slow its interest rate rises in December. However, contracts tracking Wall Street’s benchmark S&P 500 fell 0.4 per cent on Monday, while those tracking the tech-heavy Nasdaq 100 lost 0.2 per cent.
At least some of that reversal is likely down to a US jobs report out on Friday, which showed strong continuing demand for workers. Non-farm payrolls rose by 263,000 in November, compared with an expected 200,000, according to data released by the Bureau of Labor Statistics.
US government bonds, meanwhile, sold off, with the yield on the interest rate-sensitive two-year Treasury rising 0.03 percentage points at 4.31 per cent as the price of the security fell. The yield on the benchmark 10-year note added 0.01 percentage points at 3.51 per cent.