China shares rebounded sharply on Tuesday after a four-session losing streak, with the benchmark index logging its best daily performance in six weeks, as healthcare, consumer, and tourism stocks soared ahead of a week-long National Day holiday and amid the easing of COVID-19 restrictions in Hong Kong and Macau.
The sentiment was further boosted by a Morgan Stanley note expecting China's policymakers to take steps in the coming months that would allow the country to reopen from COVID-19 from spring 2023.
** The blue-chip CSI 300 Index closed up 1.5%, while the Shanghai Composite Index gained 1.4%. Both indexes jumped the most since Aug. 11.
** The Hang Seng Index ended almost flat, hovering around an 11-year low amid overseas monetary tightening and recession worries, and the Hang Seng China Enterprise Index added 0.2%.
** "We think a reopening will happen, because the strict COVID-19 management approach has led to challenges of significantly weaker income growth and a sharp rise in youth unemployment," Morgan Stanley said, adding the outcomes are at odds with the policy goal of common prosperity.
** "Moreover, the spillover effects from the headwinds of weaker exports growth and a continued drag on property sector activity are intensifying," the firm's economists wrote in a Monday note.
** Shares of healthcare companies and tourism-related firms surged 4.6% and 5.5%, respectively, while consumer staples added 3.1%.
** Shares in Macau casino operators jumped for a second straight session, with Melco International rising 9.2%, as the gambling hub aims to open to mainland Chinese tour groups in November for the first time in almost three years.
** Meanwhile, Hong Kong scraped its COVID-19 hotel quarantine policy for all arrivals.
** China's central bank stepped up cash injection towards the quarter-end by making the biggest daily offering in seven months on Tuesday, to "maintain liquidity level stable".
** China will start its National Day golden week from Oct. 1, a traditional peak season for tourism and consumption, but its health authority is encouraging people to stay put during the holidays to reduce the spread of COVID-19.
** Profits at China's industrial firms shrank at a faster pace in January-August, as strict COVID-19 restrictions and a deepening property slump weighed on demand.
** China's securities regulators recently told some fund managers and brokers to avoid massive equity sales ahead of next month's Communist Party Congress, in an effort to avoid big market fluctuations, two sources said.
** Tech giants listed in Hong Kong edged up 0.6%, with food-delivery giant Meituan soaring 4% to become the biggest boost lifting the Hang Seng benchmark. (Reporting by Shanghai Newsroom; Editing by Subhranshu Sahu)