U.S.-listed Chinese stocks give up earlier gains as investor digest reopening shift

U.S.-listed Chinese stocks give up earlier gains as investor digest reopening shift

Alibaba headquarters in Hangzhou, China.

Bloomberg | Bloomberg | Getty Images

Shares of Chinese companies listed in the US erased earlier gains on Monday after China eased further Covid restrictions to speed up the reopening of the economy.

The Invesco Golden Dragon China ETF, which tracks the Nasdaq Golden Dragon China Index, was last traded 0.5% lower after rising 3% earlier. Ali Baba and Pinduo earlier gains reduced and rose only 0.5%. Tencent music entertainment also rolled over and fell 1%. Bilibili was flat after recovering 10% early in the session.

The Index contains 65 companies whose common stock is publicly traded in the United States. Most of their business is conducted in the People’s Republic of China.

The earlier rally came as some major cities, including Beijing and Shenzhen, took steps to relax Covid testing requirements and quarantine rules amid an economic slowdown and public unrest. The move marked a departure from China’s zero-tolerance approach, which has included enforced lockdowns and frequent testing for the past two years.

China is ready to announce a nationwide reduction in testing requirements and allow positive cases and close contacts to be isolated at home under certain conditions, Reuters reported, citing sources familiar with the matter.

Morgan Stanley upgraded Chinese stocks to an overweight rating in light of the change in course. Morgan Stanley has had an equal weight rating on Chinese stocks for almost two years.

The Wall Street firm called the latest developments “a confirmed path towards definitive post-Covid reopening”.

The Hang Seng Tech Index, which represents the 30 largest Hong Kong-listed tech companies, rose 9.3% in Asian trading hours. China’s onshore and offshore yuan topped $7 against the US dollar for the first time since mid-September.

– Michael Bloom and Jihye Lee of CNBC contributed to this report