Chinese stocks ripped higher today.
Here was the original rumor, which started in Chinese:
Heard that “Reopening Committee” has been formed & led by Wang Huning, Politburo Standing Member. The Committee is reviewing COVID data from US/HK/SG to assess various reopening scenarios, target 03/2023 reopen.
This was followed by a Bloomberg report, which wasn’t the strongest denial:
Chinese Foreign Ministry spokesman Zhao Lijian said he’s “not aware of what you mentioned,” when asked whether the government formed a committee to assess ways to exit covid zero.
Now China isn’t the UK, so not everything is leaked before it’s implemented.
Two things are important here:
1) This is a taste of what’s to come when China does reveal some kind of reopening: the US dollar is softer, equities much strong (+5.2% in Hong Kong) and oil up 2% in a classic risk-on bid. I don’t discount what happened in Australia either with the RBA doing just 25 bps. Treasury yields are down around 14 bps across the curve today and that’s not exactly a reopening trade.
2) There is some talk that China will never reopen but that’s tough to believe. A much better bet is that it’s comng and when the market knows something is coming, it can be surprisingly patient. So whether that’s in Q1, Q3 or 2024, it’s coming.
