Chinese stocks in US rise on watershed moment for Covid Zero policy

Bloomberg

Chinese stocks listed in the US soared after Beijing made significant changes to the stringent Covid Zero policy that has bogged down the economy and dented appetite for the country’s equities.
The KraneShares CSI China Internet Fund, an exchange-traded product holding more than 40 Chinese stocks, jumped 5.1% in premarket trading. Stocks that are most sensitive to an economic reopening rallied, with online travel agency Trip.com group gaining 8.7%. Among major internet stocks, Alibaba Group Holding and JD.com both gain at least 3.6%.
China reduced the amount of time inbound travellers must spend in quarantine, scrapped a system that penalises airlines for bringing Covid-positive passengers into the country, and pulled back on mass testing in a raft of measures that mark a major pivot from the Covid Zero policy. European stocks with exposure to China — such as luxury stocks LVMH and Kering SA — also rise.
This is potentially “a watershed moment, with the evolving stance a reflection of the economic necessity of reopening,” said Adam Montanaro, investment director of global emerging markets equities at Abrdn. “I would still expect reopening to be gradual but we are seeing increasing signposts toward it, and this should continue to be an
important sentiment boost.”
The rally in US-listed Chinese stocks followed strong gains Hong Kong peers, with the Hang Seng Tech Index closing up more than 10% in its biggest one-day gain since March. Sentiment was also boosted after softer-than-expected US inflation data raised hopes of an easing of Fed rate hikes.
Still, uncertainties remain as China repeated its adherence to Covid Zero. Some major cities are still under partial lockdowns amid spiking virus cases, with China’s daily infection rate exceeding 10,000 for the first time since April.
The news is encouraging, but “no clear timeline for a reopening has been provided,” said Nomura economist Ting Lu. Any easing in national Covid rules may be offset by stricter local measures, Lu said, adding that he “maintains hope but avoids hype.”