5 Things Investors Need to Watch As Beijing Signals Shift
- Chinese cities have loosen COVID restrictions after mass protests and lifted Chinese stocks.
- Market watchers are waiting to see if China is ready for a complete reopening.
- Here are five things experts said they are monitoring in China after protests rocked the markets.
Chinese equities ended last week higher after several cities in the country relaxed strict COVID-19 regulations. But, it is still unclear whether the government will scrap the zero-COVID policy which it established after the outbreak started in 2019.
Protests in least 17 citiesTen people were killed in an apartment burning in Urumqi. Local residents were furious at the lockdown measures that had been put in place to block access to the building. In a rare display against China’s authoritarian government were protestors. called for President Xi Jinping to resign.
China’s top pandemic officialLast week’s developments appeared to signal a slowing down in zero-COVID policies, but the government has yet teem with a comprehensive reversal. Hong Kong’s Hang Seng IndexThe rise was 6.3% Shanghai CompositeThe gain was 1.8% but both are still significantly lower for 2022, with the respective declines of 20% and 13%.
“Hopefully, the Chinese government will unlock a little more. But they know China and have a tendency to keep a tight rein on their affairs, “Darrell Martin founder and CEO of Apex Trader FundingInsider was informed by, a proprietary trading platform.
Martin said that retail investors should be ready for defensive action if Beijing’s zero COVID policy decision is against them.
“I think you need to learn how short trade in this market. That’s something that many retail traders are foreign to – where they can sell first and buy second,” he said. “There are short ETFs … and for more active investors, they can short the market in a regular trading account or investing account.”
Here are some market experts’ observations as global investors monitor developments surrounding the zero-COVID stance of the Chinese government.
Market losses will increase with more crackdowns
Mark Mobius, an emerging markets investor legend, stated last week that Chinese stocks might be under more pressure because of the government’s response.
Mobius said that Xi cannot tolerate protests and would therefore take a tough stance against any protesters. Bloomberg TV. “More people will get arrested and they’ll probably go further in population control in many regions.”
“So if you have this kind of scenario, then you have to consider that the market won’t do that well in short term,” he said.
FOMO is back in China
The “recent pickup in China equity inflows … suggests the fear of missing out is back,” Emmanuel Cau, European equity analyst at Barclays, wrote this week. He wrote that China’s mobility in 2022 will be lower than in 2020 when the pandemic began, but it is the reverse for Europe and the US.
“So while reopening may take some time, it seems reasonable to expect a positive economic impulse or less growth drag next year in China than this year.”
Metals prices to rise
Bank of America stated that China’s reopening would increase upside potential for certain metals. This is despite the fact that China accounts for half of global metals demand.
“A second leg higher in Fed’s tightening cycles in 2H23 is a key downside risk for commodity prices, especially gold. We expect Chinese economic activity will pick up as Zero Covid policies are gradually reduced lending support to the commodities complex,” wrote Francisco Blanch of BofA’s global commodities department.
The bank stated that it is more positive on copper and other transition metals as Chinese investment in infrastructure and their electrical grid should be combined with increased sales of electric cars. Copper could reach $12,000 per tonne next year and aluminum may reach $2738 a ton.
Position for China’s reopening
Anastasia Amoroso of iCapital, chief investment strategist, wrote that she is bullish on energy stocks because it will help her position herself if China “truly,” reopens its economy in 2023.
The country’s traffic congestion and airline bookings should be considered, along with overall mobility. [recover]She stated that it was important to support more oil demand in an otherwise constrained supply situation.
Brent crude oilFriday’s oil price was above $85 per barrel. It has fallen about 13% in the past month. The S&P 500 energy sector has risen modestly over the past month but it’s zoomed up 64% during 2022.
China policy, afterall, is “impossible for prediction”
Activist short-seller Carson BlockCNBC reported this week on CNBC, that China hasn’t been defining its economic policy goals. Investors need to price in such risks.
The founder of Muddy Waters Research saidWall Street investment banks’ projections about China’s next COVID policy move are viewed through the “prior lens” a government that was open for foreign investment and raising its citizens’ standards of living.
“You need to realize that no one can predict China policy. The guy you know has many ‘guanxi’ relationships or connections in China. Block said that this doesn’t really matter anymore. “So price in to the understanding that you will wake up one day and pay what you can. [say]It’s down 90%. Because that’s where China is right now. It is impossible for anyone to predict the future at a macro-level.”
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