China, Hong Kong stocks gain on Fed, COVID policy pivots

China and Hong Kong stocks started December on a bullish note, tracking global markets amid expectations that the U.S. Federal Reserve will slow the pace of rate hikes, and signs of some relaxation in China's strict anti-COVID curbs.

China and Hong Kong stocks started December on a bullish note, tracking global markets amid expectations that the U.S. Federal Reserve will slow the pace of rate hikes, and signs of some relaxation in China's strict anti-COVID curbs. China's bluechip index CSI300 gained 1.3% by the lunch break, while the Shanghai Composite Index rose 0.7%.

Hong Kong's Hang Seng Index rose 1.6, after jumping 27% in November in its best month in 24 years. Asian markets were upbeat following overnight gains on Wall Street, after Federal Reserve Chair Jerome Powell opened the door to a slowdown in the pace of monetary tightening.

Investors are also doubling down on bets that China is moving toward a reopening of its economy by relaxing draconian anti-COVID measures that have hit growth, disrupted life and work, and triggered protests. Nuno Fernandes, portfolio manager for GW&K's Emerging Wealth Equity Strategy said the impact of the anti-COVID strategy on the economy was becoming too great for the government to accept.

"So our expectation is that they would exit the dynamic zero policy, and that's what we're experiencing now. It's the beginning stages of exiting that policy," he said. Chinese Vice Premier Sun Chunlan called for further efforts to improve COVID-19 prevention and control measures, urging "optimisation" of testing, treatment and quarantine policies, as the virus weakens in pathogenicity, state media reported on Thursday.

In Guangdong's provincial capital of Guangzhou, where riots and disturbances recently made headlines, authorities eased restrictions, allowing close contacts of COVID cases to quarantine at home, according to the government and local media. China's consumer stocks jumped on optimism over the signs of a wider re-opening. Spirit maker Kweichow Moutai rose more than 2% to a one-month high.

Consumer companies "will greatly benefit from the re-opening of the economy, and so we're going to see an incredible recovery in profitability for these companies," said GW&K's Fernandes. Tech stocks in China and Hong Kong also rose sharply following a nearly 10% surge in Nasdaq-listed Chinese stocks .

China's tech-focused STAR Market rose 1.4%, while Hong Kong's Hang Seng Tech Index jumped 2.4%. COVID testing companies, including Wondfo Biotech and Labway, tumbled after the government vowed to respond to public criticism.