Chinese stocks outperformed other markets on Tuesday as fresh steps to loosen Covid-19 controls were unveiled by authorities.
This year, global markets have been dominated by high inflation in developed economies and by aggressive interest rate rises, particularly in the US, to try to cool it down. Next year, some of the focus for investors is likely to shift to China, where Covid restrictions that have been in place for close to three years are falling away fast. The country is due to remove quarantine requirements for inbound travellers in January.
Markets in Hong Kong and Australia remained closed on Tuesday. But China’s CSI 300 closed 1.2 per cent higher.
“The biggest story is what is happening in China — that’s giving a lift to Asian markets,” said Neil Shearing, chief economist at Capital Economics. One long-term impact is likely to be on the dollar, as nerves surrounding China have formed one key area of support this year.
“Generally when risky assets go up, safe assets like the dollar go down,” said Shearing, warning that “some optimism needs to be tempered though, [as] the path will be more bumpy than many are foreseeing”.
Elsewhere, trading remains shut in the UK after the public holidays while in Europe, stocks indices were about 0.5 per cent higher.
Futures pointed to gains of around 0.7 per cent in the S&P 500 when the US benchmark fires up later in the global day in generally subdued market conditions after the Christmas break. Nonetheless, US stocks are on track for one of the worst ends to a year in two decades.
The S&P 500 has fallen almost 6 per cent this month alone, making it one of the worst December performances in two decades. The MSCI World index is down 19 per cent over the course of 2022.
“It will take a minor miracle for 2022 to not be the weakest year for global stock markets since the financial crisis of 2008,” said analysts at Nordic bank SEB in a note.