Chinese markets are rallying early in the session as local investors take a more pragmatic approach to the current Covid proceedings. Indeed, a probable outcome is a quicker loosening of restrictions once the current Covid wave and numerous protest flash points subside.
China markets are perking up to new housing support, a potential rate cut, and speculation that protests may expedite a shift from Covid-Zero policies.
There is no doubt many western companies are facing supply chain problems; what is often overlooked is that China is as bullish on companies like Apple as Apple is on China. Hence policymakers need to quell the demonstrations and get people back to work. So far, the limited follow-through in global markets indicates that investors believe Xi will find a way.
And while the heavy police presence may unnerve a Western audience, it effectively returns business as usual. It allows long-term investors to peer down that 6-12 month-looking lens more comfortably. The Chinese economy is expected to display a distinct “two halves” next year, where a brutal winter will give way to above-consensus growth in H2.