Stock markets in Asia gained on Tuesday after China said it would drop its quarantine requirements for inbound visitors early in the new year.
In a further easing of Covid regulations, China will not require inbound travellers to go into quarantine starting from Sunday January 8, the National Health Commission said on Monday.
Beijing said it would also downgrade the seriousness of Covid-19 because it has become less virulent and will gradually evolve into a common respiratory infection.
In Hong Kong, MSCI’s broadest index of Asia-Pacific shares outside Japan was up 0.5% in morning trading, while China’s blue chips gained 0.6% and Japan’s Nikkei stock index rose 0.43%.
US stock futures, the S&P 500 e-minis, inched up 0.6%, indicating the market is set to rise as traders return to their terminals on Tuesday after the Christmas holiday.
Markets in some regions including Hong Kong and Australia remain shut on Tuesday.
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Outbound Travel Also Reopening
Chaoping Zhu, a global market strategist and JPMorgan Asset Management, said the latest policy move from Beijing indicated economic activity in most major cities may return to normal very quickly, which would be very positive for investors.
“Most Chinese cities could recover from the first wave of the latest Covid-19 outbreak by January… this would be faster than people have expected,” he said.
But Zhu said there was concern of an outbreak lasting longer and weighing on the economy, but noted that developments had in general been better than expected.
He also said the reopening of China, which also entails resuming outbound visits for Chinese tourists, will lift consumer and service sectors outside of the country, particularly those in nearby Southeast Asia.
Inbound tourists had recovered 60% to 70% by November for many ASEAN countries, Zhu said, citing in-house research, but there is still a gap between now and 2019 before the pandemic.
“This gap will be filled by Chinese tourists. This is the last piece of the puzzle,” he said.
US Dollar Eases, Aussie Rises
Meanwhile, the dollar moved broadly lower on Tuesday while Australia’s and New Zealand’s currencies jumped as risk appetite grew after China scrapped its quarantine rule.
The kiwi surged 0.65% to $0.63115 while the Aussie gained 0.25% to $0.67485 in mostly thin year-end trading. The two currencies are often used as liquid proxies for China’s yuan.
Oil prices ticked up on thin trade on Tuesday, on concerns that winter storms across the United States are affecting logistics and production of petroleum products and shale oil.
Brent crude was up 73 cents, or 0.9%, at $84.65 a barrel by 0122 GMT, while US West Texas Intermediate crude was at $80.41 a barrel, up 85 cents, or 1.1%.
US Treasuries will resume trading on Friday. The benchmark 10-year yield climbed the most last week since early April, ending around 3.75%.
The latest Personal Consumption Expenditures (PCE) price index, released on Friday showed inflationary pressure is easing.
But US Federal Reserve policymakers remain concerned by the strength of the labour market and the stickiness of service sector and wage inflation, which could complicate the central bank’s efforts.
Analysts from Citi flagged upside risk in a report on Friday that the Fed’s policy interest rate could reach 5.25% to 5.50% by the end of 2023, largely based on expectations of the labour market continuing to add jobs in the first months of 2023 despite already being very tight, putting further upward pressure on wages and non-shelter service prices.
- Reuters with additional editing by Jim Pollard
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