Zero-Covid undermines support for stock market

But the market reaction has been a damp squib as all eyes turn to the effects of zero-Covid.

SHANGHAI: Patience is wearing thin among China’s beleaguered stock investors as worries about the impact of the latest Covid upsurge eclipse promises of official market support.

Authorities have somewhat delivered on last month’s pledges by extending a lifeline to the property sector, committing to ease monetary policy, shelving plans for a real-estate tax, restarting some gaming approvals and removing a key hurdle that threatened to pull American depositary receipts listed in New York.

But the market reaction has been a damp squib as all eyes turn to the effects of zero-Covid.

The stunning reversal in the CSI 300 Index mid-March has petered out as lockdowns to contain the nation’s worst Covid outbreak since early 2020 strain the economy.

The benchmark remains mired in a bear market and is little changed since March 16, when stocks roared back from a historic rout after the state council first vowed to keep the market stable.

“The market desperately wants economic activity to return to normal,” said Wang Zhuo, fund manager at Shanghai Zhuozhu Investment Management Co.

“Though unleashing more liquidity at this stage would help, that would not be as potent as easing of virus curbs.”

China’s central bank gave lenders a modest cash boost last Friday and refrained from cutting interest rates, taking a cautious approach with monetary easing even as the Covid outbreak takes a toll on the economy.The zero-Covid policy has pressured everything from manufacturing and trade to inflation and food prices. — Bloomberg