After China eases Covid lockdown, Chinese stocks rally

After Beijing halved the mandatory quarantine period, Chinese shares rallied closer to the bull market, marking a shift away from the government's fixation with Covid zero that has clouded the outlook for investors.

The CSI 300 Index closed 1% higher Tuesday, taking gains from an April low to 19% -- among the best performing major benchmarks in the world during that period. Hong Kong's Hang Seng Index erased an earlier loss to close 0.9% higher. Currencies in Thailand and Australia count on China for tourists and trade.

China s decision to cut its quarantine period to 10 days from three weeks for inbound travelers shows authorities concern about the economic toll from stringent virus restrictions. With the support of monetary and fiscal policies, Chinese stocks will continue to outperform while global peers buckled under the pressure of rising interest rates.

The relaxation sends the signal that the economy comes first, said Li Changmin, Managing Director at Snowball Wealth in Guangzhou. China s decision to eradicate Covid at all costs has been a key overhang for the economy's outlook. With Tuesday s announcement seen as likely to foster a recovery in the world's second largest economy, other assets also got a boost.

Futures contracts on the S&P 500 extended their advance to 0.7%. The yuan erased losses in both offshore and onshore markets.

Bullish calls on Chinese stocks have been getting louder, helping the CSI 300 Index to surpass global peers by the most since 2014 this quarter. Governor Yi Gang said in a rare interview with a state broadcaster, the People's Bank of China pledged to keep monetary policy supportive to aid the economy's recovery. The advance was fueled by the ease of lockdowns in Shanghai and Beijing.

And with inflation just over 2% in China, the People's Bank of the US is in a sweet spot that allows authorities to focus on policy bolstering.

Jane Foley, a strategist at Rabobank in London, said this news suggests that the authorities won't be as stringent with Covid controls as was expected.

She said that the PBOC is pledging to keep monetary policy supportive, referring to Governor Yi Gang's latest comment. This suggests a potentially more optimistic outlook for the Chinese economy, which is good news for commodity exporters such as Australia and all of China's trading partners. If you're too old for an internship, try a returnship instead.