Finance experts at Clermont Meridian Trading forecast that a complete China reopening will drive a 20% increase in Chinese equities, indicating that the government may be preparing to relax its Covid-Zero policy following a key leadership summit.
“During the past week, Chinese stock benchmarks have surged in response to rumors that Beijing is closing in on a major pivot that could see China reopening to the rest of the world as early as the first quarter of next year. With 92% of our retail clients being extremely bullish on Chinese equities, we are looking forward to an impressive start to the new year,” said Matthew Bird, Institutional Director of Equities at Clermont Meridian Trading.
Chinese stocks surged on Monday, with the Hang Seng China Enterprises Index extending a 9% increase last week, as investors jumped on the intended reopening plans. The gains have mainly held even as health officials reinforced their commitment to Covid Zero and daily infections climbed to the highest level in over six months.
The market will pre-trade any potential reopening around a month in advance, and the upward trend may continue for up to three months, according to Clermont Meridian Trading analysis. The consumer sector and domestic cyclicals will reap the biggest rewards.
George Willis, SVP of Equity Trading at Clermont Meridian Trading, remarked, “When we experience an indication of reopening, our local investors react to that rapidly. It is a completely different perspective from our international investors, who continue to view the Chinese market as a market with too many unknown factors.”
The Hang Seng China Enterprises Index closed last week with its best weekly increase since 2015. The benchmark for mainland equities, the CSI 300 Index, also gained by more than 6%, despite trading 0.4% lower on Monday.
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