Speculation that Beijing will soon relax its Covid-zero policy fueled a rally in stocks in Hong Kong and China at the close of a turbulent week last week, but Goldman Sachs economists believe China may still be “months away” from reopening.
The government’s zero-tolerance approach on Covid was repeated by Chinese health officials over the weekend, despite the global movement to loosen restrictions.

Even yet, greater China’s stock markets maintained their confidence, and on Monday morning in Asia, the Hang Seng Tech index briefly crossed the 5% threshold.
The real reopening is still months away because elderly vaccination rates are still low and case fatality rates among those who are unvaccinated look to be high, according to Hong Kong official data, according to a note published on Sunday by Goldman Sachs analysts led by Hui Shan.

China stocks may jump 20% at reopening

The second quarter of 2023 may see China reopen, according to Goldman.
The stock market will benefit when that moment arrives, according to economists at the U.S. investment bank who noted that there might be a surge before the relaxing of restrictions.

Based on empirical, top-down, and historical sensitivity studies, we predict that a full reopening might result in a 20% increase in the value of Chinese equities, according to a separate note by economists including Kinger Lau.
The domestic cyclicals and consumer sectors outperformed, the paper stated, “Equity markets often react more strongly to local policy relaxation than to international liberalisation.”

According to Goldman’s experts, the Chinese government will probably maintain its zero-Covid policy “until all the essential medical preparations are done.”
Only 60.81% of adults in Hong Kong who are 80 years old or older have gotten all three doses, according to the most recent government figures.

According to separate official data from Hong Kong, the death rate for unvaccinated adults aged 80 and older was 14.79%, whereas the rate for the same age group who received three doses was much lower—approximately 1.48%.
A safe and orderly reopening is currently highly challenging, according to the Goldman Sachs paper.