Shorter quarantines seen as positive for consumption, recovery, growth

China's A shares staged a strong rally on Friday, reflecting brightening market expectations over the country's economic recovery on the back of optimized COVID-19 control measures, market mavens said.

The benchmark Shanghai Composite Index rose by 1.69 percent to close at 3087.29 points, the highest level since late September, fueled by the rollout of 20 measures on Friday to optimize the nationwide COVID-19 containment.

Newly announced measures like shortened quarantine periods for incoming travelers and close contacts of people with COVID-19 infection, experts said, would help minimize COVID-19 disruptions to economic growth while boosting business confidence and consumer sentiment.

The ChiNext Index, which tracks China's Nasdaq-style board of growth enterprises, rose 2.04 percent to close at 2405.32 points.

Pointing to improving global investor sentiment toward A shares, northbound trading of the stock connect programs between the bourses on the Chinese mainland and in Hong Kong saw net capital worth 14.67 billion yuan ($2.06 billion) flow into A shares on Friday, the highest amount since early September.

The onshore renminbi also strengthened, rising 1.7 percent to about 7.12 per dollar as of Friday afternoon, while the offshore renminbi jumped 0.48 percent.

Wu Chaoming, deputy director of the Chasing International Economic Institute, said the optimized COVID-19 containment measures can help reduce economic impacts of the virus by expanding consumption scenarios, stabilizing expectations of business activity and better securing industrial chain stability.

Wu said he expects the country's fourth-quarter economic growth to pick up and reach between 4 percent and 4.5 percent year-on-year, up from the third quarter's 3.9 percent and his previous forecast of about 4 percent.

Shares of real estate and building material enterprises were among the biggest gainers on Friday, with an index tracking real estate enterprises jumping 6.97 percent to 5932.52 points, market tracker Wind Info said.

Experts attributed the real estate surge to the country's ramped-up efforts to facilitate private real estate enterprises' bond financing.

The National Association of Financial Market Institutional Investors said on Thursday that the self-regulating organization had agreed to review the plan of Longfor Group Holdings Ltd, a private developer, to sell bonds worth 20 billion yuan, with credit enhancement work underway.

A number of other private real estate enterprises are also working on potential bond issuances, as part of the country's scheme to facilitate private enterprises' bond financing worth an expected 250 billion yuan in total.

Reflecting the targeted nature of relevant efforts, the campaign is also known as "the second arrow", where the People's Bank of China, the country's central bank, offers funding support via relending facilities while market institutions purchase the notes or provide credit enhancement services.

Zhou Maohua, an analyst at China Everbright Bank, said the scheme is "a big positive" for the real estate sector, helping alleviate developers' financing difficulties and stabilizing development confidence in the sector.

Experts said stabilizing the real estate-related financing remains key to keeping the country's credit and economic expansion steady, as PBOC data showed on Thursday that new mid — to long-term loans to the household sector — a proxy for mortgages — came in at 33.2 billion yuan last month, down 388.9 billion yuan year-on-year.

"Policy support is expected to be flexible," Zhou said. "If there is reasonable demand, the 250 billion yuan in policy-supported bond financing quota would have space to grow."

Better coordination between COVID-19 control and economic recovery will go in tandem with the policy support to alleviate business difficulties to brighten the country's economic prospects, Zhou said.

While the optimized COVID-19 containment measures are conducive to economic recovery, it is still necessary to strengthen macroeconomic adjustments, Wu of Chasing Institute said.