A People’s Liberation Army display overlooks a street scene in Beijing on the day Chinese President Xi Jinping and his U.S. counterpart Joe Biden hold a virtual summit November 16, 2021 in Beijing, China.
Thomas Peter | Portal
Stocks in Hong Kong and China rallied at the end of a volatile week last week, buoyed by speculation Beijing could soon ease its Covid-zero policy – but economists at Goldman Sachs say China may still be “months” from the reopening is removed.
Over the weekend, Chinese health officials reiterated the government’s stance of sticking to its zero-tolerance policy towards Covid even as most of the world has started lifting controls.
That didn’t stop the ongoing optimism in Greater China markets, with the Hang Seng Tech Index briefly rising over 5% in Asian morning trade on Monday.
We estimate a full reopening could push Chinese stocks up 20%…
“Actual reopening is months away as vaccination rates among the elderly remain low and mortality rates among the unvaccinated appear high, according to official data from Hong Kong,” Goldman Sachs economists led by Hui Shan said in a Sunday note.
China stocks could rise 20% on reopening
Goldman maintains its view that China could reopen in the second quarter of 2023.
When it does, it will be good news for the stock market, economists at the US investment bank said, noting there could be a rally that could lead to an easing of measures.
“We estimate that a full reopening could push Chinese equities up 20% based on empirical, top-down and historical sensitivity analysis,” economists including Kinger Lau said in a separate note.
“Equity markets typically respond more positively to local policy easing than international reopening, with domestic cyclical and consumer sectors outperforming,” the statement said.
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The Chinese government is likely to stick to its zero-Covid policy “until all necessary medical preparations are in place,” Goldman analysts said.
The latest Hong Kong government statistics show that only 60.81% of people aged 80 and over received all three doses.
Separate government data from Hong Kong showed that the fatality rate among the unvaccinated people aged 80 and over was 14.79%, while the fatality rate among those in the same age group who received three doses was much higher, at about 1.48% was lower.
“A safe and orderly reopening is currently very difficult,” Goldman Sachs said in a statement.
