Shares of Chinese stocks are moving higher after Morgan Stanley upgraded the China stock market to Overweight and COVID restrictions begin easing in the country.
- Everyone, Chinese stocks, we're also tracking those this morning. They're rising today after Chinese authorities took further steps to ease COVID-19 restrictions that have weighed on the country's economy. On this news, Morgan Stanley has lifted its outlook on China to overweight from equal weight. That's its first upgrade since January of 2021. And there's a lot to really break down here. But some of the biggest moves, you're seeing that within the Hang Seng index as well for technology and, really, just this move away from what-- or what a move away from a zero COVID policy would look like for China. That's what the market is so reactive to here this morning.
- Yeah. Considering everything that's going in the world right now, top tickers on our site-- NIO, Xpeng at one point pre-market I was checking up 15%. Big moves in these stocks. But can you trust it? Can you trust that China is going to get this reopening? Because you mentioned before, Julie, we were here what three weeks ago saying the economy was going to reopen. Then we got a couple more weeks of lockdowns. Apple got tossed into the mix. The market went down. And now we're back to reopening.
- Well, and even to be clear here-- well, that's because the Chinese government is giving these signals that it is opening up. To be clear, it is very geographically mixed within China right now. Beijing is still closed. Shanghai showing some signs of opening. And it really is all about the flow of where they are seeing cases. Cases do seem to have potentially peaked. There were just over 29,000 COVID cases reported for Sunday, which is the lowest in about two weeks' time.
So it seems like they're on the downslope of their recent spike in cases potentially. And it's still-- they've kept the cases much lower. The challenge for the Chinese government is reopening when they've been clear that reopening can be very dangerous from a health perspective. So now they're trying to manage through and say, well, COVID is survivable, et cetera. So sort of changing the messaging a little bit. But it is pretty extraordinary that they do seem to be reacting to all the protests that were going on, and particularly protests that were happening around workplaces like Foxconn, for example. Foxconn, by the way, or a.k.a. Hon Hai Precision, which makes a lot of the Apple products, has said they are still operating a closed loop at their facilities. So that's something to note as well even as we do see some government noises about reopening.
- Yeah. They had basically said that revenue in November, that moved lower by 11.4% year over year. And that really factoring in a lot of the production related problems. Apple, this has also flowed through to them. Many investors have had kind of time to price this in. But over an extended period of time if you do see a hit to production like we have, that leads to some of the calls that you got on the street from Wedbush, from some of the other firms that cited the issues of production and not being able to have enough supply at a time where in the holiday season trying to churn through and ultimately hit some of that demand or reach some of that demand where that is amazingly critical even going into the next year to set up for what is essentially the Q1 for Apple, I believe, that fiscal year for right now.
- Right. And Foxconn also said it's going to be returning production back to normal. One more note, by the way, on the strategy front-- there have been a lot of Wall Street banks that have been coming around to the China story because of the hopes around reopening. Morgan Stanley becomes maybe not the last, but one of the later ones to kind of join that bandwagon and say that they are turning bullish again because of potential reopening. That said, they're putting reopening a little bit later next year in April. There is some optimism it could happen January, February. But they're talking a little bit of a later time frame. Still, they like China stocks here. So kind of interesting. And we did see a rally occur overnight in China, as well as seeing those ADRs rise here