The yuan and Chinese consumer stocks rallied on Monday as China relaxes Covid-19 restrictions – spurring speculations that the worst of economic impact is over.
The offshore yuan and the benchmark CSI 300 Index both rose around 1% before paring, with consumer shares leading gains.
The easing of restrictions in Beijing and Shanghai are likely to boost expectations that Chinese shares are bottoming out.
“Covid cases and lock downs have been the key factors holding back China equity valuations, so the easing of these will be positive,” said Bloomberg Intelligence analyst Marvin Chen as reported by Bloomberg.
Continued reopening with more stimulus may kick start a recovery in the second half, he added.
A small but growing group of investors and analysts are now calling a bottom for Chinese markets after strict lockdowns prompted banks including JPMorgan Chase & Co. and Goldman Sachs Group Inc. to slash their growth forecasts for the economy. Some of those concerns are starting to abate as Shanghai, the epicenter of the latest Covid outbreak, rolled out a raft of measures to support a return to normalcy on Sunday.
“Yuan is being buoyed by the 50-measure action plan for Shanghai as well as news that Beijing has also controlled the outbreak and eased some of its restrictions,” said Fiona Lim, senior FX analyst at Malayan Banking Berhad. “Broader dollar decline certainly helps the drop in the dollar-yuan rate.”
