Zero-hope policy?It looks like China might be making a U-turn on its easing of zero-covid rules and it hasn’t done much good for the markets.
- Protests have erupted throughout China as a result of covid restrictions remaining in place for the foreseeable future. It’s caused Hong Kong’s Hang Seng index to drop by around 1.57% today as fears of increased strain on the economy continue to circulate.
- The Chinese government’s strict covid measures have been in place for almost three years, which has caused problems for the economy and raised youth unemployment in the country by 20%.
- European stocks were also sliding on the news, with the pan-European Stoxx600 already dropping by 0.95% today. The German DAX index has also slipped 1% today on the news, and crude oil futures dropped by around 3% as global markets prepare for disruption.
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FinallyChina has been stricter on covid than a helicopter mom is about curfew, so when the region finally eases some restrictions investors send stocks rallying in the hope of a recovery.
- Chinese stocks are on a rally at the moment after state media reported that covid travel restrictions are soon to be eased and quarantine time reduced. The Hang Seng index jumped 7.74% on the news, with the Shenzhen Component and Shanghai Composite gaining 2.12% and 1.69% respectively.
- The Chinese stock market has spent most of 2022 in the doldrums, with the Hang Seng Index down by more than 25% YTD. A lot of that has come down to mass shutdowns across the region because of its zero-covid policy, which has not only hindered Chinese economic growth but worsened supply chain snarls around the world.
- Easing quarantine rules could be taken as a hint that officials are pivoting away from that zero-covid stance, which is a big reason for the excitement in the market. However, there’s still no official timeline for the easing, and it’ll likely be a while before all restrictions are lifted and the world’s second largest economy can return to normal. Still, good news is better than no news.
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