What happened
Stocks of some of China's most popular companies continued to rally on Tuesday, capping several days of increases. Many of the nation's largest population centers have continued to struggle with COVID-19, resulting in economic uncertainty and government regulatory crackdowns. During the past several days, however, there have been signs that the pandemic may be easing, resulting in the lifting of some government restrictions and providing a boost to China's battered stock market.
Shares of Huya (HUYA -2.22%) gained as much as 11.8%, JD.com (JD 0.20%) climbed as much as 7.5%, and Alibaba (BABA 0.28%) surged as much as 6.3%. As of 11:59 a.m. ET, the trio were still trading higher, up 9.7%, 6.5%, and 4.6%, respectively.
So what
Authorities in Shanghai, the country's largest city, said they will take a major step forward toward easing pandemic-related restrictions beginning this week, after a steady decline in new infections. The city has been on a government-mandated lockdown for two months, the result of the country's "zero-COVID" policy. This came as the number of new COVID-19 cases in China fell below triple digits for the first time in three months. There were just 29 new cases in Shanghai on Monday, a remarkable decline from roughly 20,000 new infections per day early last month.
Image source: Getty Images.
Shanghai's Vice Mayor Wu Qing announced during a news conference on Tuesday that public transportation would begin running again this week, reconnecting the most populous city with the rest of China. Shanghai is also taking steps to gradually reopen supermarkets, shopping malls, and drug stores, though only at 75% capacity.
This followed an announcement this weekend that Shanghai would loosen restrictions, allowing some companies to open for business. Additionally, the city has developed a 50-point plan to boost economic activity and aid in the recovery. This includes electric vehicle subsidies and business tax cuts, designed to act as incentives and spur consumer spending.
There are other signs China's economy is on the upswing. Factory activity has been increasing, with the manufacturing purchasing manager's index climbing to 49.6 this month, with any measure above 50 signaling economic expansion.
Now what
These developments in Shanghai add to the growing body of evidence that China may finally be on the rebound. This in turn is helping to fuel greater investor optimism and bullish sentiment for the country's beaten-down stock market. The CSI 300 Index, which tracks China's top 300 stocks, has notched its longest winning streak since June 2021, with Tuesday marking the biggest influx of investing funds so far this year.
Investors have become increasingly bullish that the worst has passed, particularly given China's recent moves to bolster its recovery. This will likely accelerate consumer spending, the backbone of any economy, which is particularly good news for e-commerce companies including Alibaba and JD.com, and livestreaming gaming platforms like Huya.
Given the ebbs and flows of the pandemic, there are simply no guarantees that we won't see another surge of infections and government-mandated lockdowns in China. That said, these latest developments are a step in the right direction for China -- and investors.
