Neal Kimberley

Macroscope | China’s reopening is an economic tide that will raise boats across Asia

China’s Covid-19 setbacks are temporary. Its reopening will boost demand for commodities, tourism and luxury goods, lift stock prices and support Asian currencies and economies, especially Hong Kong’s

Reading Time:3 minutes

Why you can trust SCMP

Tourists at the Grand Palace in Bangkok on July 18. The return of Chinese tourists will boost economies such as Thailand’s and support their currencies. Photo: AFP

Neal Kimberley

Published: 4:45pm, 3 Jan 2023

There’s no going back. China may be facing a surge in coronavirus cases and hospitalisations after Beijing abandoned its zero-Covid policy, but that decision is irreversible. Markets have to price that in because China is on the move again.

Even allowing for the thin trading conditions between Christmas and New Year’s Day, it was notable last week how the share prices of several China-facing companies, such as HSBC, rose on the London Stock Exchange as market participants positioned themselves for a rebound in China’s economic activity.

Whether the equity market demand for these companies will sustain in early 2023 is unknowable, but perhaps what is revealing is that, although China’s problems with its surging coronavirus cases have been well documented by media around the world, that price action encapsulated a positive view of China’s economy.

Investors looking through China’s coronavirus storm towards the sunlit economic uplands beyond could well be drawn towards companies in Hong Kong.

If any jurisdiction is well placed to tap into mainland China’s economic recovery, it’s Hong Kong. Both the Hang Seng and Shanghai Composite indices fell by 15 per cent last year, but that just means a plethora of bargains for investors optimistic about China’s prospects.

After all, it’s not where prices are that matters, it’s where they are seen to be going.