Goldman projects Chinese stock market rally

Equities may soar 20% when the zero-Covid policy is lifted, strategists say

US investment bank Goldman Sachs has estimated that a complete reopening of the Chinese economy will translate to a 20% gain for the country’s equity market. In a note issued over the weekend and cited by media, the bank’s economists say they expect the Chinese government will start to relax Covid rules in the second quarter of 2023.

Among the signs that Beijing may be starting to prepare for a relaxation of its zero-Covid policy, the report cited an increase in flights and the growing adoption of an inhalable vaccine developed by CanSino Biologics.

The removal of Covid restrictions could be “one of the most visible, long-awaited, and powerful upside catalysts for the market,” the Goldman analysts wrote, adding that equity markets usually react more positively to local policy relaxation than to international reopening. “The actual reopening is still months away as elderly vaccination rates remain low and case fatality rates appear high among those unvaccinated based on Hong Kong official data,” they added.

The report follows last week’s stock market rally in China, as the Hang Seng China Enterprises Index capped its best weekly gain since 2015. On Monday, the index extended last week’s 9% advance. The CSI 300 Index, the benchmark for mainland stocks, also jumped more than 6% on Friday, though it traded 0.4% lower on Monday.

The stock-market rally was driven by speculation that Beijing could soon relax its stringent Covid policy. The gains continued even after Chinese health officials reiterated the government’s stance of sticking to its policy of zero-tolerance against Covid.

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