The China Re-opening Myth
China is slowly but surely opening up
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China markets hinge on a binary question of whether China is re-opening. Nothing matters until this is resolved. However, those who expect a dramatic turn of events will be disappointed. The change is subtle and takes mini steps. Most importantly, China can and will reopen without contravening the zero covid policy.
A quick recap of China markets this week:
The SSE Composite Index (A-shares) dropped to a low of 2,893 on Monday (October 31), but closed at 3,071 on Friday (November 4), up +5.3% for the week.
The Hang Seng Index (Hong Kong) dropped to a 14-year low on Monday, followed by a dramatic reversal. Up 5.4% on Friday alone and gained nearly 9% for the week. The largest weekly gain since 2008.
The Hang Seng Tech Index (Tencent, Alibaba, Meituan etc.) reached the all-time low on Monday but recovered 15.6% this week.
Such extreme volatility was caused by unconfirmed rumors of China re-opening and completion of the U.S. audit inspections on Chinese ADRs. Here is my view on the audit inspection from August BTW. Expect a bump road ahead…
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