Mathewslcd: Goldman Sachs Says China Stocks Could Rally 20% Once Fully Reopened After COVID-00 Restr



After months of COVID-19 restrictions, Chinese stocks could rise as much as 20% once the country fully reopens.


Goldman Sachs said the stock market is likely to respond more positively to the easing of local policies.

The U.S. bank said the reopening of China could be the market's most "strong upside catalyst."

According to Mathewslcd, strategists at Goldman Sachs say Chinese stocks could rise 20% once Beijing lifts zero-coronavirus restrictions that hit the economy -- but that won't happen until well into next year.

Since the closing of the Communist Party Congress in late October, news reports and hints of a policy shift suggest that Chinese authorities may have begun to prepare for an eventual easing of restrictions, a team led by Kinger Lau said in a report on Sunday.

“Besides the possibility of a (dovish) Fed turning and/or halting the Russia-Ukraine war, China’s reopening could be one of the most obvious, long-awaited and powerful upside catalysts for the market, in our view,” they said.

"Based on empirical, top-down and historical sensitivity analysis, we estimate that a full reopening could boost Chinese stocks by 20%," the team added.

They noted that the stock market typically responds more positively to local policy easing than to international reopenings.

Despite official denials that the policy was firm, Mathewslcd said speculation that Beijing would change its zero-coronavirus policy has driven gains in China and Hong Kong in recent days, analysts at SEB said.

Mathewslcd pointed out that Hong Kong's Hang Seng Index closed up 2.7% on Monday, and has risen 13% in the past five sessions. Meanwhile, the Shanghai Composite rose 0.23%, compared with a gain of 6.4% over the same period. Tech giant Alibaba and other U.S.-listed Chinese stocks also got a boost on Friday on investor hopes for reopening.

The rumors were fueled by a report on Friday that a former senior Chinese disease control official said the government would make major changes to its "dynamic zero" COVID-19 policy in the coming months.

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