China stocks roar back on reopening 'rumours'; oil price rises 1%

Chinese stocks roared back from a rout and the yuan strengthened as speculation mounted that policymakers are making preparations to gradually exit the stringent Covid Zero policy that’s been the biggest bugbear for investors.

A gauge of Chinese stocks listed in Hong Kong surged almost 7 per cent intraday, rebounding from its lowest close since late 2005, as unverified social media posts circulated online that a committee was being formed to assess scenarios on how to exit Covid Zero. Shares pared gains after Chinese Foreign Ministry spokesman Zhao Lijian said he’s “not aware” of such a committee.

The onshore yuan rose as much as 0.7 per cent before paring gains to 0.4 per cent. It fell to a 15-year low earlier in the session. The yield on 10-year government bonds rose two basis points to 2.66 per cent, ending four straight days of declines.

 The market had seen a heavy bout of selling following last month’s Communist Party congress, where President Xi Jinping’s power grab led to expectations that strict lockdowns and other market-unfriendly policies will likely persist. Previous rebounds on reopening speculation have all failed to last as authorities continued to pursue Covid Zero.

“I’m not surprised by the rumour circulating online about a conditional reopening,” said Liu Xiaodong, a fund manager at Shanghai Power Asset Management Company. “The state council could be waiting for the deliberation by the team of experts to determine the next step. The market is also willing to buy that an inflection point is near for Covid Zero.”

The Hang Seng China Enterprises Index ended up 5.5 per cent, while the Hang Seng Tech Index rallied 7.8 per cent in its best day since April. On the mainland, the CSI 300 Index closed 3.6 per cent higher, the most since March.

The impact of the speculation was felt beyond China markets. US stock index futures extended gains while a broader gauge of Asian equities climbed more than 2 per cent. 

Iron ore futures in Singapore posted the biggest gain in more than a week.

Oil gained on speculation that China policymakers are preparing to gradually exit the country’s Covid Zero policy. Brent crude for January delivery rose $1.56, or 1.68 per cent, to $94.37 a barrel at 1429 GMT. The December contract expired on Monday at $94.83 a barrel, down 1 per cent. US West Texas Intermediate crude rose $1.63, or 1.88 per cent. Agencies