Chinese stocks rally on reopening hopes; Morgan Stanley upgrades to overweight

Chinese stocks saw crisp gains Monday aft large cities successful China reportedly further loosened Covid-related restrictions, a affirmative motion for an system that has been grappling with strict microorganism measures for implicit 2 years.

The rally comes aft Beijing and Shenzhen announced implicit the play they would assistance measures that required commuters to amusement antagonistic Covid trial results earlier travel, contempt the caller question of Covid cases.

The Hang Seng TECH Index, which represents the 30 largest exertion companies listed successful Hong Kong, surged 8% successful Asia's trade.

The leap builds connected the index's show truthful acold this quarter, gaining astir 20% to date. But it is still sitting successful carnivore marketplace territory with astir 27% successful losses year-to-date.

Tech heavyweights Bilibili rose much than 25%, Tencent gained 6% and Meituan roseate much than 3%, while Alibaba jumped 8% and Xiaomi gained much astir 11%. Electronic vehicle-maker Xpeng gained 24%, starring gains for the broader index, Li Auto jumped 12% and Nio climbed much than 15%.

The Hang Seng scale roseate 4% portion China's CSI 300 index, which tracks the largest largest mainland-listed stocks, roseate astir 2%.

The rally successful the equities marketplace is owed to a "clear" way distant from China's zero-Covid policy, Hao Hong of Grow Investment Group said connected CNBC's "Street Signs Asia."

"The absorption is precise clear, due to the fact that earlier this, galore radical and markets were having tons of doubts astir whether China was superior astir moving guardant connected phasing retired Covid-zero," helium said.

"Now, it seems to astir radical that Covid-zero is being phased out, and that's wherefore the marketplace is reacting precise strongly," helium said.

China's onshore and offshore yuan strengthened further arsenic well, pushing past 7-levels against the U.S. dollar for the archetypal clip since mid-September. Oil prices besides saw a leap astatine the unfastened of Asia's session, with Brent crude futures and U.S. West Texas Intermediate futures climbing implicit 2% connected hopes of rising China demand.

The latest displacement successful China's Covid regulations besides accrued optimism for investors betting connected further reopening successful the wider region, stretching to Macao's casino sector.

Hong Kong-listed casino operators besides saw important gains, with MGM China rising 19%, Wynn Macau climbing 16% and Sands China adding 13%. Galaxy Entertainment roseate 6% and SJM Holdings gained much than 7%.

Following the quality of China further relaxing immoderate of its Covid restrictions, strategists astatine Morgan Stanley raised its proposal standing for Chinese equities to overweight.

Strategists led by Laura Wang said successful a Sunday enactment that the upgrade marks the extremity of the firm's equal-weight stance connected Chinese equities that it has held for 23 months since January 2021, oregon astir 2 years.

Morgan Stanley noted aggregate factors that bespeak a "meaningful affirmative development" for Chinese stocks since November, including what the steadfast views arsenic "a confirmed way towards last post-Covid reopening."

A "path towards reopening is yet set, apt bumpy but with nary turning back," the enactment said, adding that a wide absorption for the federation to unfastened up was reinforced erstwhile wellness officials announced elaborate plans to boost aged vaccinations.

– CNBC's Abigail Ng, Michael Bloom contributed to this report