Shares in Chinese drug and beer makers and funeral service companies are rising, and investors are trying to ride the wave out of the coronavirus as the world’s most populous country is easing restrictions put in place by the pandemic.
Over the past seven days, a group of Chinese pharmaceutical companies have been among the top performers on stock exchanges in Hong Kong, Shanghai and Shenzhen.
Amid expectations of a surge in demand for fever and other medicines, shares in mainland China pharmaceutical groups Guangzhou Baiyunshan Pharmaceutical and Hualan Biological Engineering have risen by more than 10% in the last five days of trading, while Shanghai Fosun Pharmaceutical was up 7%.
Shijiazhuang Yiling Pharmaceutical, which makes Lianhua Qingwen, a government-endorsed herbal Covid-19 treatment, rose 11% over the same period.
That compares with a 0.3% drop in the CSI 300 index of stocks listed in Shanghai and Shenzhen.
The surge was triggered by President Xi Jinping’s decision last week to abandon his strategy of mass testing, quarantines, lockdowns that close entire cities and laborious electronic procedures to trace contacts with infected people.
The reversal of course led to the biggest wave of infections by the coronavirus since the pandemic began, in Wuhan, in central China, almost three years ago. The decision raised fears that the number of deaths and hospitalizations associated with the disease will grow, especially among the tens of millions of elderly Chinese who have not received the three doses of vaccine needed for sufficient protection.
Another company attracting investors is Shanghai-based Fu Shou Yuan International, China’s largest burial services provider and seller of cemetery plots.
The company, whose shares are listed in Hong Kong, rose 6% from last week’s mark and 60% since the end of October. Before the health policy shift, analysts said the company had been hurt for much of the past year. Restrictions on movement in China meant people were keeping the ashes of their loved ones at home as they waited for the country to reopen.
Among other stocks that have performed well are Spring Airlines, a low-cost airline, and major national air carrier Air China, which benefited from the lifting of travel restrictions, as well as three beer makers. and air freshener maker Midea.
Rory Green, an economist at research group TS Lombard, said the end of the “Covid zero” policy is “one branch of the market that seems increasingly crowded”, and that “a better bet” could be the positioning for the economy. post-Covid.
Green added that equity markets would likely go through three phases, the first of which focuses on immediate health policy changes, followed by a weaker period of “risk containment” as the Covid exit wave spreads and economic activity reacts disappointingly. The final phase is risk return, as positive market sentiments about the reopening advance.
“We are currently in phase one,” he said, adding that TS Lombard expected the government to “redouble” its political support for Chinese hardware technology in the longer term.
“Sectors have a high beta/growth ratio and will benefit from continued efforts to restructure capital allocation to more heavily favor party priorities [Comunista]”, he said.
Translated by Paulo Migliacci
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