The return of industry and the easing of technical restrictions pave the way for the recovery of Chinese stocks – The Diplomat

Although the previous year was extremely difficult for the Chinese economy, more bullish forecasts seem to be returning as government data showed that factory activity across the country picked up in June. Combined with easing rules on tech stocks, China has managed to outperform other markets in a recovery.

Amid news that factory activity is on the rise, June 30, Shenzhen Component initially up more than 2 percentbefore settling at 1.57% to close at 12,896.2 while the Shenzhen Composite climbed 1.1% to 3398.62.

Market moves came after a relatively prosperous period as China’s strict zero-COVID-19 policy, under which regions can be placed under lockdown after small outbreaks of COVID-19 cases, was eased to allow industries to reopen and support productivity.

While markets have welcomed the industry’s return, investors may be wary of news that the Chinese Communist Party may try to maintain a crackdown on next five years – this means that any further outbreaks of the disease can greatly affect the economy.

How data show, local Chinese stocks have had a relatively good month compared to US stocks in recent months. Notably, we can see that the Shanghai Shenzhen CSI 300 index remains strong in June after the easing of lockdown measures, while the S&P 500 index fell.

Do you like this article? Click here to sign up for full access. Only $5 per month.

While Chinese stocks surged to their highest level in three months, US stocks struggled to come to terms with a 75 basis point rate hike imposed by the Federal Reserve in mid-June.

Despite a strong recovery, the situation in China remains volatile. Recent data suggests that the COVID-19 infection rate in China may rise again, while investors’ fears about the prospect of a recession are manifested in volatile oil prices. As the financial downturn continues gain a foothold in Asiatraders began to bet on falling demand for oil.

“There is very clear evidence of the economic stress caused by high prices, which some people are calling the destruction of demand.” Mike Mueller said, head of Asian crude oil trading company Vitol. He added that it is “not only oil, but also liquefied natural gas.”

One of the biggest impacts of the ongoing troubles in China’s stock market has been China’s reassessment of its approach to its tech sector.

After a series of meetings in late May, China’s economic officials indicated that the worst of the crackdown on tech stocks may be in the past. This step offers a recovery perspective for for the first time since the end of 2020when many leading domestic technology companies such as Alibaba, Tencent, Didi and Meituan suffered from heavy government regulation.

Now, there is hope that the Chinese government will choose to ease the crackdown as a stimulus measure to counter the severe economic problems the country has faced over the past two years, as well as the closure of many industries following the recent COVID. – 19 flashes.

The news of the easing of restrictions led to an increase in trading volume, as investors found the prospect of a recovery too tempting to ignore. In addition, politicians in Beijing were shown to be living up to their promises made in the first quarter of 2022 to support the economy and prevent a further downturn, threatened by problems in the housing market, as well as restrictions on technology companies.

“I think we hit bottom here,” Chi Lo, Senior Investment Strategist Asia Pacific at BNP Paribas Asset Management, Bloomberg said. “If you look at the biggest hurdle for Chinese equities — tighter regulation in the tech sector — the worst is over.”

Notably, a resurgence in Chinese tech stocks, coupled with an easing of regulatory restrictions, could pave the way for a major Ant Group listing that could boost Chinese stocks both domestically and internationally.

When Ant Group was originally set to list in November 2020, the company would have set a world record for the largest IPO in history. At the time, the financial services giant was expecting to raise $37 billion using a value of around $315 billion.

Do you like this article? Click here to sign up for full access. Only $5 per month.

Although times have changed since the end of 2020, the prospect of a major listing is very important for Chinese tech stocks.

Amid speculation that regulatory easing could pave the way for Ant’s listing, US-listed Alibaba shares are more accessible to Western investors. stock trading platformshave been subject to wild price fluctuations in recent months. While investors are anticipating a major listing, China’s regulator has yet to say any talks are underway to restart the deal.

Although there are many hurdles that may still arise in the coming months. China’s return to industry and regulatory easing paved the way for a much more optimistic outlook for the future. Shenzhen Stock Exchange. If the number of COVID-19 cases remains low, we may see Chinese stocks recover faster than many other markets around the world.