Goldman Sachs has issued a note predicting that when the Chinese economy fully reopens, it will translate into a 20% rise in the nation’s equity markets. In the note the bank’s economists predict that in the second quarter of 2023 the Chinese government will begin to relax their stringent “zero-Covid” policies, and this will spur a full reopening of the Chinese economy.

The report cited an increase in air-travel and the growing adoption in the country of an inhalable vaccine by CanSio Biologics as signs the government may be starting to prepare for a laxening of the stringent anti-Covid measures.

In the note the analysts wrote that the removal of Covid restrictions might prove to be “one of the most visible, long-awaited, and powerful upside catalysts for the market.” They noted that local policy relaxations usually prompt a more positive reaction from equity markets than international reopenings.

They added, “The actual reopening is still months away as elderly vaccination rates remain low and case fatality rates appear high among those unvaccinated based on Hong Kong official data.”

The note came on the heels of a massive rally in China’s stock markets, with the Hang Seng China Enterprises Index seeing its best week since 2015. Monday saw the index extend the 9% advance of the previous week. The CSI 300 Index, which is the benchmark for mainland stocks, rose over 6% just on Friday, though it gave back about 0.4% on Monday.

Much of the rally was driven by investor speculation that the government was soon going to relax its anti-Covid policies. However the gains continued even after the government officially said it had no intention at present of relaxing the “zero-Covid” policies.