Chinese Stock Market Rises Following A Week-long Holiday

Chinese stock markets climbed strongly on Monday as trading resumed following the Lunar New Year vacation. The government's pledge to increase spending and support economic growth further boosted investor enthusiasm.

The Shanghai Shenzhen CSI 300 index increased 1.3%, while the Shanghai Composite index rose 0.6%, with positive trading in the majority of sectors. In early trading, automobile and industrial companies performed the best, while energy equities declined.

During the holiday season, state media sources indicated that retail travel and spending rebounded substantially to reach pre-pandemic levels, which bodes well for the Chinese economy. The Lunar New Year celebrations of 2023 were the first in three years to occur without any anti-COVID restrictions, following the country's December decision to relax its rigorous zero-COVID policy.

China has reopened its international borders, solidifying a departure from the zero-COVID policy that had shook the economy since 2020.

This week, the focus shifts to important business activity figures, which are anticipated to have improved in January compared to the previous month due to the relaxation of anti-COVID measures.

The world's second-largest economy is still reeling from the repercussions of tough anti-COVID measures, which are slated to continue through 2022. Said limitations had also prompted a severe slowdown in China's economic growth, but the country's fourth-quarter performance was still better than anticipated.

The Chinese government has set out a spate of economic stimulus measures through 2022 in an effort to stimulate GDP. The country's State Council has pledged to promote local economic growth and consumption this year, according to reports from the weekend.

As the country deals with its worst-ever COVID-19 outbreak, it is anticipated that rising COVID-19 illnesses would also postpone a more robust economic recovery.

However, health officials recently reported a dramatic decline in new deaths from the virus, despite the Lunar New Year holiday increasing the likelihood of virus transmission.

Hong Kong stocks lagged behind their Chinese counterparts, with the Hang Seng index falling 0.5% due to weakness in large technology sectors, ahead of a wave of important earnings reports this week. The broad Asian stock market was likewise subdued in advance of this week's Federal Reserve meeting.