Hong Kong stocks rose and European stocks were steady on Wednesday as China’s relaxation of its longstanding strict zero-Covid policies offset worries about the durability of the global economy.
Hong Kong’s Hang Seng index rose 1.5 per cent, with all sectors apart from real estate in positive territory. The index is set to finish the year 14 per cent lower but has risen by a third since the end of October as Beijing has loosened pandemic restrictions that have constrained China’s economic growth since early 2020.
In Europe, the FTSE 100 reopened after the Christmas holidays, rising 0.7 per cent. Europe’s regional Stoxx 600 opened flat. US futures were steady, with contracts tracking Wall Street’s benchmark S&P 500 and the tech-heavy Nasdaq Composite both trading between gains and losses ahead of the New York open.
China’s National Health Commission on Monday said it would drop quarantine requirements for inbound travellers from January 8, having earlier this month scrapped the requirement for positive cases to quarantine at centralised facilities.
Cases have soared as a result, with officials estimating that roughly 250mn people, or 18 per cent of the population, were infected with Covid-19 in the first 20 days of December.
Iris Pang, chief economist for greater China at ING, said Beijing’s relaxation of its zero-Covid policies would boost domestic consumption and travel-related industries in particular, even as economic growth in Europe and the US slows, denting international demand for Chinese goods.
“Our house view is that the US and Europe could enter a mild recession in the first half of 2023,” Pang said. “We therefore expect that the Chinese government will increase fiscal strength to support the domestic economy by continuing construction of uncompleted home projects and plans for more transport, energy and technology infrastructure.”
China’s CSI 300 index of Shanghai- and Shenzhen-listed shares fell 0.4 per cent on Wednesday, though it has risen 10 per cent since mid-October.
Commodity prices declined, with Brent crude, the international oil benchmark, down 0.9 per cent at $83.56 a barrel. Dutch TTF gas futures, the benchmark European contract, dropped 7.4 per cent to €76.78/MWh to their lowest level since February owing to milder-than-expected weather and lower demand.
US government debt rallied across the board. The yield on the benchmark 10-year note fell 0.03 percentage points to 3.82 per cent, while the yield on the two-year note fell 0.02 percentage points to 4.33 per cent. Yields fall as prices rise.
