Talking Point  

Cautious optimism for investors as China renews vaccination efforts

Cautious optimism for investors as China renews vaccination efforts
REUTERS/Thomas Peter

The unrest in China continues to put pressure on the rest of Asia but news the country is stepping up efforts to push more older people to get vaccinated has led to hopes this could hasten a relaxation of the rules. 

Craig Erlam, senior market analyst - UK and EMEA at OANDA, said, the headwinds facing China were intensifying and the protests of recent days could make it even more challenging to navigate.

He also cautioned that even if China committed 100 per cent to its vaccine drive, especially among the elderly and vulnerable, the move away from zero-Covid would take time as the virus spreads rapidly throughout the country necessitating swift action to control the spread. 

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He added: “Even the best-case scenario is one of significant turbulence for the world's second-largest economy next year.”

Erlam also points to the challenges ahead highlighted by the Chinese PMIs, with the zero-Covid stance combined with the property market crackdown having severely impacted domestic sentiment, while a slowing global economy weighs on external demand. 

He said: “With both the manufacturing and non-manufacturing PMIs falling deeper into contraction territory than anticipated, the country really has a mountain to climb in order to achieve decent, consistent growth once more.”

Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown, agrees investors are clinging onto hopes that renewed attention of a vaccination programme for older citizens will hasten a relaxation of the rules. 

She said: ‘’The toll of rising Covid cases and rolling lockdowns on the Chinese economy has been pulled into sharp focus by PMI data showing manufacturing and services activities fell at the fastest pace since April. It’s clear that a change to the zero-Covid policy can’t come soon enough to propel a recovery….

“But given it’s so unclear exactly when authorities will change tack, stocks in Asia remained volatile,” she added.