HONG KONG, May 17 — Hong Kong led a rally across Asian markets today on hopes that China’s economic engine Shanghai will ease its weeks-long lockdown and gradually reopen businesses, though analysts caution against any long-term relief. 

Much of the city of 25 million has been under lockdown since April as Beijing attempts to stamp out an Omicron-fuelled virus surge under its strict zero-Covid policy. 

Vice Mayor Chen Tong said Sunday that the city would gradually reopen businesses starting this week. 

Though no details were given and residents were still in their homes on Tuesday, Asian markets have cheered over the announcement.

“Hopes that the Shanghai lockdowns will ease, along with the ensuing supply chain disruptions, have been enough to lift Asian equities as well, which are staging a modest bounce,” said Jeffrey Halley of OANDA.

Tuesday’s rally coincides with the third day in a row that Shanghai has recorded no Covid-19 cases outside of its quarantine facilities, he said. 

“We should continue watching the headline ticker for daily Omicron cases. Most especially, in Shanghai, where if literally one case appears again, any relief rally in Chinese markets could disappear in a puff of smoke.”

The impact of Beijing’s zero-Covid strategy on the world’s second-largest economy was revealed Monday when official data showed that retail sales and industrial production in April on-year had slumped to their lowest levels in more than two years.

World markets have also been roiled by surging inflation and Russia’s war in Ukraine — leaving investors jittery.

“Markets remain in fight or flight mode while rolling the dice on recession odds,” Stephen Innes of SPI Asset Management said.

“Investors’ hopes remain elevated that yesterday’s worse than expected Chinese outruns could prove to be a ‘whatever it takes’ moment, and local policymakers will step hard on the stimulus pedal.”

China has announced measures to help young people find jobs, with the urban unemployment rate at its highest in over two years, and officials have lowered the mortgage rate for first-time homebuyers as well.

Today, Hong Kong rose by more than 3 per cent, while the mainland’s two indices — the Shanghai Composite Index and Shenzhen Composite Index — closed higher. 

Manila, Singapore, Seoul, and Sydney were also in the green all day. 

European markets followed the lead, with Frankfurt, Paris and London all trading up at opening. 

Commodities concerns

In commodities trade, wheat prices soared to a record after major producer India banned its export because of a heatwave hitting production.

New Delhi said the move was needed to protect the food security of its 1.4 billion people in the face of lower production and steep global prices.

Worldwide wheat prices had already surged on tight supply concerns after Russia’s February invasion of agricultural powerhouse Ukraine, which previously accounted for 12 per cent of global exports.

By yesterday’s close of the Euronext market, the price of wheat jumped to €438.25 (RM2,001) per tonne, breaking the previous closing record of 422.40 struck on March 7, according to trader Damien Vercambre at grains brokerage Inter-Courtage. 

Oil also jumped overnight, and by Tuesday US crude benchmark WTI hovered around US$114 a barrel. 

“The EU’s rising tensions with Russia and the resulting uncertainties over the bloc’s oil-and-gas supply remain front-and-centre,” Vandana Hari, founder of Vanda Insights in Singapore, told Bloomberg. 

“Having said that, with a US$10 jump since last Tuesday, it’s hard to see much more upside in crude unless events take a sudden turn for the worse.”

Key figures at around 0720 GMT

Hong Kong — Hang Seng Index: UP 3.1 per cent at 20,573.61 

Shanghai — Composite: UP 0.7 per cent at 3,093.70 (close)

London — FTSE 100: UP 0.4 per cent at 7,491.42

Tokyo — Nikkei 225: UP 0.4 per cent at 26,659.75 (close)

West Texas Intermediate: DOWN 0.1 per cent at US$114.07 per barrel

Brent North Sea crude: UP 0.1 per cent at US$114.37 per barrel

Euro/dollar: UP at US$1.0459 from US$1.0436 at 2030 GMT Monday

Pound/dollar: UP at US$1.2415 from US$1.2323

Euro/pound: DOWN at 84.24 pence from 84.67 pence

Dollar/yen: UP at 129.39 yen from 129.08 yen

New York — Dow: UP 0.1 per cent at 32,223.42 (close) 

 - AFP