Chinese shares rally strongly, as Shanghai, Beijing reactivate economic activity after containing COVID19 resurgence
Published: Jun 06, 2022 05:26 PM

Stock market Photo: cnsphotos

Stock market Photo: cnsphoto

Chinese stocks related to lithium, solar power and tourism rallied on Monday, buoyed by the prospect that the reopening of Beijing and Shanghai will boost market demand while supportive macro-economic policies will fire on China's economy on all cylinders in the second half of the year.

Among the major indexes, the ChiNext Index, the NASDAQ-style board of growth firms, gained 3.92 percent and the Shenzhen Component Index was up 2.66 percent.

The Shanghai Composite Index was up 1.28 percent. Meanwhile, the Hang Seng Index climbed 2.56 percent to close at 21,621.47.

Ganfeng Lithium Co Ltd, China's largest lithium compounds producer, surged by 8.71 percent to 126.84 yuan ($19.06) per share on Monday, Chinese electric vehicle maker BYD rose by 5.72 percent to 318.23 yuan, and domestic travel agency Western Regions Tourism Development Co was up 7.45 percent to 25.83 yuan.

The rebound in Chinese shares reflect the growing confidence of investors in the government's ability to contain COVID-19 flare-ups in China following a two-month lockdown of Shanghai, according to Yang Delong, chief economist at Shenzhen-based First Seafront Fund Management Co.

"The Chinese economy will embrace opportunities in the second half of the year, thanks to the rollout of a range of fiscal and monetary stimulus policies to boost the economy, combined with targeted pandemic prevention measures," Yang said.

The Caixin services purchasing managers' index (PMI) released on Monday stood at 41.4 in May, better than April's reading of 36.2, underscoring that the business activities in the country's service sector is improving.

Some investors are betting that the worst might be over now, and offshore investors using Hong Kong's Stock Connect trading scheme have bought 28 billion yuan of Chinese mainland equities last week, the Financial Times reported on Friday.

As the latest outbreak ebbs in Beijing and Shanghai, the two cities have lifted emergency measures. Beijing loosened epidemic restrictions on May 29 in non-quarantined areas, with multiple measures rolled out to facilitate the resumption of work and everyday life. Starting from Monday, dine-in service at restaurants in Beijing will be available and couriers are allowed to enter residential communities. In addition, public venues including libraries, cinemas and gyms are allowed to resume operations, with total visitor capacity capped at 75 percent.

Following a lockdown of two months, Shanghai embarked on restoring normalcy across the city on Wednesday.

"All of our four facilities in Shanghai had resumed production before May 7. In addition, our office staff members who had been working from home will return to work on Monday," US manufacturing company 3M told the Global Times.

In the latest move to shore up the domestic economy, the State Council unveiled a new document on May 31 urging implementation of a package of detailed policy measures to expand domestic demand, ensure stability of industrial supply chains, and speed up resumption of work and production in key sectors.

Global Times