Chinese stocks boosted by Covid vaccine progress and looser restrictions rumour

Chinese pharmaceutical stocks and the broader market received a boost on Wednesday after local authorities approved a new vaccine to tackle coronavirus, amid rumours that Beijing was looking at relaxing its zero-Covid policy.

Shares in CanSino Biologics rose as much as 70 per cent in Hong Kong after the Chinese pharma group said its inhaled Covid-19 vaccine had been approved for use in some cities. Its mainland China-listed shares also added as much as 20 per cent.

The wider Chinese market rallied for a second day, with the Hang Seng index adding as much as 2.6 per cent and the CSI 300 gaining up to 1.9 per cent, after unsubstantiated claims on social media that Beijing was preparing a road map to loosen lockdown measures and travel restrictions.

CanSino said 13 cities in the eastern province of Jiangsu were preparing to roll out the vaccine. The announcement comes after Shanghai authorities greenlit the product last month to improve inoculation rates in China’s most populous city.

The company has developed the world’s first approved inhaled vaccine against Covid, which some experts believe could appeal to sections of the vaccine-hesitant population and boost the country’s vaccination uptake.

Proponents of the technology argue the delivery method could improve protection as it produces an immune response in the respiratory system, where the virus first enters the body.

Jin Dong-Yan, a virologist at the University of Hong Kong, said CanSino’s approval was “a step in the right direction” because data indicate that the technology behind its adenovirus vector vaccine provides better protection than the inactivated vaccine technology used by China’s existing Covid vaccine makers, Sinovac and Sinopharm.

Shares in other mainland vaccine makers also rose, with Shijiazhuang Yiling Pharmaceutical and Shanghai Junshi Biosciences up as much as 10 per cent and 24.5 per cent in Shenzhen and Hong Kong, respectively.

Zhao Bing, a Shanghai-based analyst at Huaxing Securities, said that following a bruising year for Chinese pharmaceutical stocks, “investors are re-evaluating” the sector.

“Investors panicked before. Valuations are cheap, and companies have had stable performance. It’s time for a rebound,” he said.

A Twitter post by an economist circulated online on Tuesday, saying Beijing had created a task force to consider plans to reopen the economy. The rumour and subsequent market rally came despite existing controls that underscore China’s adherence to zero-Covid.

This week, local authorities in Shanghai and Zhengzhou, home of the world’s largest iPhone factory, introduced localised lockdowns to halt a rise in cases. On Monday, Shanghai authorities locked down the city’s Disneyland theme park after one guest tested positive.

The area around Apple contractor Foxconn’s facility in Zhengzhou entered a week-long lockdown on Wednesday. The move comes after workers fled the factory over the weekend to avoid being quarantined on-site after an outbreak at the facility.

Chinese equities have experienced tumultuous trading in recent weeks, with investors selling off stocks after the country’s Communist party congress, where leader Xi Jinping replaced economic pragmatists on his leadership team with a cadre of loyalists.

Last month, China’s lead epidemiologist Liang Wannian said there was “no timeline” for an exit from zero-Covid rules. Beijing points to China’s large elderly population and insufficient medical resources as the main justification for its adherence to zero-Covid, even as the rest of the world has lifted most coronavirus controls.

Helen Chen, greater China managing partner at L.E.K. Consulting in Shanghai, noted that the “government’s vaccination push has waned as resources shifted to manage outbreaks”.

“The vast majority of Chinese were vaccinated in the second quarter of 2021, so immunity offered by those shots has waned,” she added.

Additional reporting by Xueqiao Wang in Shanghai, Edward White in Seoul and Ryan McMorrow in Beijing