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Hong Kong
CNN Business
—
Global traders are increasingly feeling more bullish on China, as they bet the country will gradually unwind Covid restrictions following widespread protests.
Multiple cities across China loosened Covid-19 restrictions over the weekend. Starting Monday, Shanghai residents will no longer require a negative Covid test result to enter outdoor venues including parks and scenic attractions.
Investment bank Morgan Stanley
(AANXX) has upgraded its view of the future performance of Chinese equities for the first time in nearly two years.
“Multiple positive developments alongside a clear path set towards reopening warrant an upgrade and index target increases for China,” its analysts said in a research note on Monday. They raised China equities to “overweight” from “equal-weight,” a position they had held since January 2021.
“We are at the beginning of a multi-quarter recovery in earnings revisions and valuations,” they said.
The bank recommended that investors increase their investment allocations to offshore Chinese equities. MSCI China, an index tracking major Chinese stocks available to global investors, will hit the 70 level by the end of 2023, according to Morgan Stanley. That would be a 14% increase from its current level.
It also raised its target for Hong Kong’s benchmark Hang Seng Index to 21,200 by the end of next year. That’s up 10% from its current level.
The offshore yuan, a key gauge of how international investors think about China, strengthened sharply against the US dollar on Monday. It rose more than 1% to trade at 6.947 per dollar, breaking through the important level of 7 per dollar for the first time in more than two months.
In the domestic market, the yuan, also known as the renminbi, surged even…
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