COVID-19 Cases Soar While Stocks Fly: How To Play China's Reopening In The Market

As COVID-19 spreads through China, and the world’s second-largest economy is dealing with an overwhelming wave of new infections, shares of Chinese-based funeral and healthcare companies are going higher.

The stock market play may not be over, as the country had not yet formally abandoned its quarantine restrictions or travel restrictions, which take effect on Jan 8.

What Happened: China will reopen borders and abandon quarantine after it downgrades the COVID-19 threat on Jan. 8, but new cases are already surging, leading to understaffed and overcrowded hospitals.

In the weeks leading to the relaxing of COVID-19 measures, shares of China’s largest cemetery operator, Fu Shou Yuan International Group, reversed what would have been a 35% loss on the year to nearly 15% gains.

Shijiazhuang Yiling Pharmaceutical group is up almost 59% in the year.

Huatian Hotel Group Co. is up about 13% over the last month.

The rush to reopen the country comes as the Chinese economy was dealing with the negative effects of widespread lockdowns; notably contracted retail sales in November, and unemployment, which reached six-month highs.

Why It Matters: Despite recent signals from China's top officials that they will return in 2023 to focus on growth and betting on the easing of pandemic restrictions to boost the economy, it can be presumed that those top leaders weren't prepared for the sudden increase in cases.

If they had, Bloomberg reported, the Chinese government could have utilized the three years it spent combating the virus to strengthen its healthcare system by creating more critical care facilities and stockpiling medications.

China could have started a massive vaccination campaign aimed at the millions of vulnerable senior citizens who were unwilling to get vaccinated or given a booster.

But, it did not do much of that.

Stocks To Watch: Chinese ETFs including Global X MSCI China Real Estate ETF CHIR, KraneShares CSI China Internet ETF KWEB, KraneShares Hang Seng TECH Index ETF KTEC, and Invesco Golden Dragon China ETF PGJ are worth keeping an eye on, because those ETFs have made notable moves over the last few weeks.

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Photo: Robert Way via Shutterstock