Despite governmental denials, rumors are spreading China may be about to make some major changes to its zero-Covid policy soon in an effort to boost economic confidence and more effectively open its economy back up. For now, the government is denying the rumors, but analysts are looking at how reopening the economy absent the zero-Covid rules would aid the Chinese markets, and thinking there may be some truth to the rumors. The end of last week saw Chinese asset prices rising, and that can be expected to continue into Monday.

Friday saw US stocks rally somewhat as well. However that rally may be short-lived. The Federal Reserve has made clear it will not be shifting to a less hawkish policy any time soon, analysts believe terminal rates will end up above 5%, the yield curve inversion is steady, and it is expected the job market will begin cooling as higher rates take effect early next year.

However some analysts are now asking if China pivoting on its zero-Covid policy could spark a global turnaround in world markets. The question became more pressing following the remarkable moves in the Chinese and Hong Kong markets last week.

Shanghai shares were up 6.4%, the biggest weekly gain since July 2020. Hong Kong’s Hang Seng popped 8.7%, making it the best week in 11 years. Meanwhile the Chinese yuan rose against the dollar on Friday the most since the currency’s one-off revaluation in 2005.

Morgan Stanley analysts commented, “Risk/reward is still attractive for being long reopening trades in China,” as a Hong Kong global banking summit was filled with pent-up investor energy, looking for an outlet in China.

On Monday, Beijing’s trade and FX reserve figures for October will be released and reveal more. It is expected to show slowing trade activity and the FX reserves, already at a half-decade low, are forecast to slip closer towards $3 trillion.