Update:
So much for all those rumors on social media about China reopening…
China’s National Health Commission has just released a statement that said it would adhere to zero Covid policy. It will also strive to control epidemics with the smallest scope, shortest time, and lowest cost.
It is necessary to thoroughly implement the CPC Central Committee’s “Decision on Earnestly Studying, Propagating and Implementing the Spirit of the 20th National Congress of the Communist Party of China”, refine the implementation plan based on the actual situation, and carry out in-depth learning and propaganda activities in various forms to fully demonstrate the study and implementation of the Party’s principles in the field of health and wellness. The profound thinking and vivid practice of the spirit of the 20th National Congress of the Communist Party of China have ensured that the cause of health care will always move forward successfully in the correct political direction.
The meeting called for the full implementation of the decisions and arrangements of the 20th National Congress of the Communist Party of China, and focus on the tasks of “promoting the construction of a healthy China”. We must be prudent and pay close attention to the prevention and control of the new crown pneumonia epidemic, unswervingly adhere to the general strategy of “foreign import, internal rebound” and the general policy of “dynamic clearing”, resolutely implement the “four early” requirements, and strive to minimize Scope, shortest time, and lowest cost to control sudden outbreaks.
China ETF FXI trimmed gains to less than 1% on the news.
This also led to a slump in US equity futures.
… this is what happens when buying rumor doesn’t pan out.
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Mainland China and Hong Kong stocks powered higher for the second session on unverified social media posts that claim a government committee has been established to roll out a plan to reopen China in March 2023.
Bloomberg reported an unverified post, first shared on the instant messaging platform WeChat with analysts and fund managers, shared a screenshot that claimed Wang Huning, one of the top leaders of the Chinese Communist Party, held a meeting on Sunday at the request of the President Xi Jinping with Covid-19 experts, possibly paving the way to reopen China.
“Speeding up a conditional opening plan, with the goal of substantially opening by March next year,” the screenshot said.
The post went viral in China and has garnered attention on Twitter. Hong Kong-based economist Hong Hao tweeted:
Another unverified post said Beijing is expected to hold a meeting at the end of the week to ease quarantine requirements.
Traders have been searching for any excuse to buy beaten-down Chinese stocks — and apparently, unverified social media posts are all it took. Bloomberg data shows the multi-day rally has led to more than $450 billion in gains in the MSCI China Index.
When stocks crashed last week after the Communist Party congress granted President Xi Jinping a third term, JPMorgan’s strategist Marko Kolanovic urged investors to buy the dip.
Any confirmation about reopening by authorities could result in a more sustainable upside for Chinese stocks and strengthen the yuan.
Investors are piling into Chinese stocks based on speculation and rumor. One must be cautious about investing in speculation. It can end very badly if not confirmed. But again, this is just another example of stock markets being giant casinos…
