China stocks close up as Shanghai's Covid-19 situation improves, tech giants soar

China stocks close up as Shanghai's Covid-19 situation improves, tech giants soar
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SHANGHAI (May 17): Chinese stocks ended higher on Tuesday (May 17) as Shanghai achieved a key Covid-19-related milestone required to ease restrictions, while tech giants and Hong Kong shares logged the biggest jump in six weeks following reports about a meeting by a top political consultative body to promote the digital economy.

Both Internet firms listed in Hong Kong and the Hang Seng benchmark surged the most since April 29, when authorities vowed at the top-level Politburo meeting to step up policy support to stabilise the economy and financial markets. 

The blue-chip CSI 300 Index ended 1.3% higher at 4,005.89, while the Shanghai Composite Index gained 0.7% to 3,093.70 points.

The Hang Seng Index rose 3.3% to 20,602.52, while the China Enterprises Index gained 3.7% to 7,076.80 points.

Shanghai reported a long-awaited milestone of three straight days with no new Covid-19 cases outside quarantine zones — the "zero Covid" status. A nationwide caseload also declined, with 1,100 new cases reported on Monday, down from 1,227 infections on Sunday.

Shanghai plans to resume outdoor activities in stages, with most restrictions on movement remaining in place until May 21. The lockdown is likely to be lifted by June.

"The good news is that the headline Covid-19 case number has been falling," Nomura wrote in a note, but "we are not at a turning point yet".

The outlook for economic fundamentals and most financial assets in the coming months will be largely determined by Beijing's stance on its zero-Covid strategy rather than the number of daily cases.

China's state planner will strengthen support for manufacturers, the service sector and small firms, it said on Tuesday, as the country's retail and factory activity fell sharply in April due to wide lockdowns.

Semiconductors and new energy firms gained 3.6% each, while automobiles surged 4.2%.

Chinese Vice-Premier Liu He is scheduled to speak in a Tuesday meeting with tech executives that had been convened by the country's top political consultative body to promote the development of the digital economy, sources told Reuters.

The meeting is being closely watched for remarks by Liu and others for clues as to how far Chinese authorities will go in easing a regulatory crackdown on the tech sector, which has been going on since late 2020.

JPMorgan analysts upgraded some Chinese Internet companies on Monday and expect "significant uncertainties" faced by the sector to abate following recent favourable regulatory announcements.

The Hang Seng Tech Index climbed 5.8%, with index heavyweights Alibaba Group, Tencent Holdings and Meituan up between 5.2% and 7%.

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