China Said to Prepare Plan to End Covid Flight Suspensions
Comment of the Day

November 04 2022

Commentary by Eoin Treacy

China Said to Prepare Plan to End Covid Flight Suspensions

This article for Bloomberg may be of interest to subscribers. Here is a section:

The focus now appears to have moved to step two, with senior leaders recently asking regulators to draw up a game plan for easing the circuit breaker rule. The third step would be facilitating a full return to normal aviation traffic, the people said. It’s unclear what the timeline is for the implementation of these two steps.

The State Council and CAAC didn’t immediately respond to requests for comment. Evidence China is even considering changes that would ease its global isolation would be scrutinized by investors, with Chinese equities near multi-year lows because of the economic damage wrought by Covid Zero’s snap lockdowns, testing drives and border restrictions. 

Shares of airlines, including China Eastern and China Southern, extended gains in Hong Kong on the flight ban news, while the yuan climbed in offshore trading. 

An unverified screenshot circulating on social media claiming a broad reopening plan was being considered sparked a $450 billion speculative rally in stock markets this week. Soon after, China’s top health body reaffirmed its commitment to the zero-tolerance virus approach. 

Eoin Treacy's view

Investors are interpreting the commitment to ZERO-COVID as “zero-covid” or at least they really want to reach that conclusion. Valuations are so attractive that people are latching onto any sign of reopening to repeat the rebounds seen in Western assets post March 2020. That’s particularly true of Hong Kong shares where the acceleration lower is giving way to a short covering rally.

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