​The Chinese Reopening, a Relief For the Economy

After the 2022 restrictions in the chinese markets, they finally decided to re open their economy to the world.

Although China is not the first concern of investors in this newly released 2023, their economic expectations are, for better or for worse, a very important variable to take into account, especially for Europe. Undoubtedly, the ”accelerated" opening of its economy after its strict zero Covid program is one of the variables that has driven the bullish rally experienced at the beginning of the year for the Stock markets, while measures are being taken after the collapse of its real estate sector.

The consensus forecast of a growth close to 5% for the world's second largest economy this year is great news compared to the poor estimates of Europe – economic stagnation – and the US (0.5%). Mali Chivakul, emerging markets economist at J. Safra Sarasin Sustainable AM, expects the Chinese economy to improve significantly in 2023 by further easing of real estate policies coupled with strong government support. To this is added the lack of tensions in their interest rates.

Other raw materials such as metals could also receive the stresses of a more buoyant economy. In this sense, Mobeen Tahir, director of macroeconomic analysis at WisdomTree, indicates that "physical inventories of most metals are well below their historical averages, while prices have recently been fixed with the lockdowns in China and the prospect of a global recession, and this is already changing.” The mining giant BHP Group indicated earlier this week that China will stabilize the demand for raw materials this financial year.

The benefited values

Goldman is very clear about the effect of China on the European market, since more than 20% of the sales of the securities that make up the European Stoxx 600 index are made in Asia, and for this reason energy and basic resources firms stand out among its recommendations as major beneficiaries of the new situation, as well as those linked to luxury, although the recent increases in their prices make them less attractive. The evolution of Christian Dior, LVMH, Hermès or Kering, with increases of around 10% so far this year, already shows the effect of China on their prices.

Source: https://cincodias.elpais.com/