HONG KONG/SHANGHAI (Reuters) – Investors caught off guard by Beijing’s sudden relaxation of its zero-corona policy are now forced to grapple with China’s post-pandemic turmoil. This is because we do not have good data to monitor the spread of infections and potential threats to the economy in the coming months.
In China, official data often confuses investors and raises questions about its credibility. Authorities have halted mass testing and reduced the reporting of infections, making information even more difficult to obtain.
Investors have struggled to get a clear picture of a spike in infections and a potential health crisis as the economy reopens, sifting through other sources like internet search data to adjust tracking models.
Investors are still confident that China will experience stronger growth in the second half of next year. But an economy that has long been elusive to investors is made all the more unwieldy by the short-term rise in cases.
“It’s a mess right now. Let’s wait and see for a month. JPMorgan Asset maintains China investment rating ‘neutral’. Even after last week’s zero-coronavirus easing, we’re taking a short-term wait-and-see position.
Prices of Chinese stocks and the yuan skyrocketed once zero-crown easing emerged and then was actually introduced. But the market has stalled this week. Hong Kong’s Hang Seng index posted its biggest monthly gain since 1998 in November and remained on an upward trend into the first week of December, but momentum has slowed since then.
The Shanghai Composite Index is also down nearly 1% since the start of the week. The offshore yuan was up about 4% in November, hitting its highest monthly gain ever, but has stalled since.
Investors see the healthcare system as a major pressure on the economy. With the healthcare system collapsing, fearing a return to a zero-corona policy, they are looking for new ways to track infections and fill in the missing pieces in increasingly fragmented public data.
The number of new coronavirus cases in China has dropped sharply in the past week, according to official data. The number of symptomatic infections announced on the 13th was 2,291, less than half the peak of 5,046 on the 5th.
However, in reality, there are rumors that the infection is spreading in some areas, and we can see the rapid spread of the infection, such as forming long queues before fever clinics and competing for flu treatment .
In the absence of reliable official data on the novel coronavirus, Nomura’s chief China economist Ting Lu has turned to new sources such as Chinese internet giant Baidu to track infections.
According to a report written by Mr. Lu to clients on the 13th, the number of searches for new coronavirus-related keywords on Baidu’s search site has increased significantly, and the capital city, Beijing, which is probably the epicenter of the current epidemic , is also increasing in large cities, localized infections are on the rise. Lu predicts an unprecedented outbreak of infections during the Lunar New Year holiday in late January next year.
Invesco’s global market strategist for Asia-Pacific, David Chao, turned his attention to the healthcare system as mass testing ends. This is because if there are signs that the medical system is collapsing, there is a chance that the government will revert to a strict management system such as isolation.
Another challenge for investors is assessing the potential shortage of workers due to rising infections and the public’s reaction to living with Covid-19.
According to Arthur Clover, head of research at the research firm Gavekal Dragonomics, the change in China’s coronavirus policy is so rapid that it is not yet reflected in the firm’s urban crown restrictions index. “The next month or two will continue to be disruptive with the rollout,” Clover said.
Aninda Mitra, head of Asian macro strategy and investment at BNY Mellon Investment Management, urged investors to be cautious. “China’s transition to wider openness is now underway and optimism is natural, but it is not a one-sided gamble,” she said in a report.
From a long-term perspective, Morgan Stanley expects China to achieve 5% growth in 2023 as the economy reopens.
But Robin Xin, chief China economist at Morgan Stanley, still believes “short-term pain is inevitable.” “Growth is likely to remain slow until early next spring,” he said.
(Reporters Summer Zhen, reporter Samuel Shen)
