The yuan and Chinese consumer stocks rose after important cities lessened Covid-19 restrictions. It leads to the speculation that the worst of the economic effect of severe lockdowns had passed.Bloomberg, May 30, 2022
Both the offshore yuan and the benchmark CSI 300 Index climbed nearly 1%. Also, consumer shares increase. The relaxation of restrictions in Beijing and Shanghai is expected to raise speculation that Chinese stocks have reached their bottom. Investors, notably Amundi SA, are turning positive as officials increase support for growth.
Both the offshore yuan and the benchmark CSI 300 Index climbed nearly 1% before falling again. Furthermore, consumer shares drive growth. The relaxation of restrictions in Beijing and Shanghai is expected to raise optimism that Chinese stocks have reached their bottom. Investors, notably Amundi SA, are turning bullish while officials increase support for growth.
Covid cases and lockdowns have been the main issues limiting China’s equity pricing, so reducing these will be beneficial. Continued reopening with further stimulus may jumpstart recovery in the second half.Marvin Chen, Bloomberg Intelligence analyst
Tsingtao Brewery Co. and Chongqing Brewery Co. were among the top gainers on the CSI 300 Index. It gained at least 7% each. The yuan surged to 6.6552 per dollar on offshore markets, while rising up to 0.8 percent locally. Last week (May 23-27, 2022), traders increased their bets on the currency falling below the crucial 7 levels in the coming months.
The 50-measure action plan for Shanghai is boosting the Yuan. Another aspect is the announcement that Beijing has relaxed some of its limitations. Furthermore, a weaker dollar surely aids the reduction in the dollar-yuan exchange.
At 12:18 p.m. in Hong Kong, a Bloomberg real-time duplicate of the CFETS yuan index increased 0.5 percent. China’s sovereign bond futures fell for the first time in six sessions, while the Hang Seng Index in Hong Kong rose 1.9 percent.
In short, China is adopting a “whatever it takes” mentality in order to rebalance Covid-19 control and economic growth. The Chinese economy will begin to recover. The yuan could be a useful barometer of market confidence in China’s policy effectiveness.
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