Market Cheers as China Eases Lockdown... Cryptocurrency Surges Too

China's Economic Capital Shanghai Eases Lockdown, Causing Fluctuations in Stock Market, Oil Prices, and Exchange Rates
Cryptocurrencies, which had bottomed out, also surge, bringing optimism

Rebound Expected Alongside Economic Stimulus Measures
"Economic Recovery Expected from June"

[Image source=Reuters Yonhap News]

[Asia Economy Reporter Kim Hyunjung] As the city lockdown in Shanghai, China's 'economic capital,' was lifted after more than two months, the market immediately reacted with rises in stocks, exchange rates, and oil prices. Cryptocurrencies, which had been sluggish for some time, also rallied, marking the largest increase in two weeks.

On the 30th, Shanghai city announced that it would allow vehicle operation in low-risk COVID-19 areas and resume ride-hailing services, while bus, subway, and ferry operations will be gradually restarted from the 1st of next month, promoting a 'full normalization.' The city lockdown, which was initially notified on March 28 to last for four days, is now moving toward normalization after more than two months. With the number of new daily infections dropping from a peak of about 27,000 in April to 67 on the 29th, the authorities made this decision as the spread of the virus eased.

The market reacted positively to the news of easing lockdown. International oil prices, which had been weak due to reduced Chinese demand, rose, and the Chinese mainland and Hong Kong stock markets, which had also been sluggish, showed signs of recovery centered on consumer goods.

The July futures price of Brent crude oil rose to as high as $120.50 per barrel during the trading session, while the West Texas Intermediate (WTI) futures price in the U.S. increased by 0.7% to $115.85 per barrel on the same day.

Paul Horsnell, Head of Commodity Research at Standard Chartered, diagnosed that China's oil demand decreased by about 1.2 million barrels per day in May due to COVID-19, and predicted that most of this would recover with the easing of lockdown measures, pushing daily consumption close to 16 million barrels. This accounts for a significant portion of the global daily consumption (about 100 million barrels).

The yuan price rose 0.8% within China's onshore market that day, and in the offshore market, it surged to 6.6552 yuan per dollar. In the Chinese stock market, Qingdao Beer and Chongqing Beer each rose more than 7%, significantly outperforming the large-cap CSI300 index's 1% gain. Jinling Hotel jumped 10%. In the Hong Kong stock market, China's sportswear brand Li Ning rose more than 9%, surpassing the benchmark's 2% increase. China's representative dining enterprise, hot pot chain Haidilao, rose about 8%, and online travel agency Trip.com Group increased nearly 4%.

Foreign investors net purchased local stocks worth 3 billion yuan (approximately 555.2 billion KRW) as of May, and onshore traders net purchased Hong Kong stocks worth about 44 billion Hong Kong dollars (approximately 6.9348 trillion KRW).

Cryptocurrency prices, which had bottomed out, also soared. As of 8:59 AM Korean time, Bitcoin was trading at 39,236,522.98 KRW, up 7.76% from the previous day. Ethereum also rose 10.20% to 2,469,576 KRW.

Experts forecast that the Chinese economy will rebound as the city lockdown is lifted. Marvin Chen, an analyst at Bloomberg Intelligence, a research institution under Bloomberg, evaluated, "The spread of COVID-19 and lockdowns were factors blocking the valuation of Chinese stocks, so easing these lockdown measures will be positive," adding that with additional economic stimulus and the resumption of economic activities, the stock market could begin to recover in the second half of this year. Tommy Xie, head of China research at OCBC Bank in Singapore, predicted that China will do whatever it takes to rebalance COVID-19 control and economic growth, and that the Chinese economy will recover starting next month.