China Reopening Stocks Jump on Report of Covid Policy Easing

(Bloomberg) -- China's consumer and retail shares rallied on Thursday after a report said that Beijing was weighing an exit from its strict Covid-Zero policy.

A Bloomberg gauge of Macau gaming stocks rose 3.4%, its biggest gain in over two weeks. Airlines and restaurants also surged, with Air China Ltd. and Haidilao International Holding Ltd. advancing by at least 3.8% in Hong Kong.

A relaxation of rules may be the needed catalyst to spur a rebound in Chinese shares, which have remained lackluster this year despite bullish calls from money managers. While Beijing is unlikely to ease controls before next spring, experimental opening measures could arrive in select cities as early as this summer, the Wall Street Journal reported, citing unidentified people.

“A fundamental shift in the Covid strategy is definitely a positive for consumer and services-related sectors, but the reopening will likely be done in phases and over several quarters,” said Marvin Chen, a Bloomberg Intelligence strategist. “The impact on earnings may not be obvious until closer to year-end, but valuation and sentiment may recover in the meantime.”

Travel stocks broadly gained, with Trip.com Group Ltd. rallying 11%, BTG Hotels Group Co. rose 6.1% in Shanghai and Utour Group adding 4.6% at the close after earlier jumping the 10% limit. Commercial property owners such as Wharf Real Estate Investment Co. advanced.

China Tourism Group Duty Free Corp. ended 2.1% lower, however, erasing earlier gains after reports over a temporary closure of a large store due to Covid controls.

Shares linked to the reopening of China's economy were in focus earlier this year after the authorities issued a broad plan to promote internal and external travel. Tourism stocks in China have been actively traded amid speculation a shift in restrictions may be imminent ahead of the Communist Party's 20th leadership congress later this year.

A relaxation in Covid policies could also likely shore up China's economy, after some recent indicators pointed to a moderation in the pace of expansion. A services purchasing managers' index slipped to a five-month low in February.

Optimism also spilled over into Thailand, a major destination for Chinese tourists before the pandemic. The Thai baht gained as much as 1% versus the dollar in the biggest advance since October.

With assistance from Bloomberg