Moneycontrol Pro Panorama | Chinese lockdowns ease, but one unknown remains

The fact that two major Chinese economic centres are reopening brings hope to investors of a recovery. (Image: Reuters)

Dear Reader,

The Panorama newsletter is sent to Moneycontrol Pro subscribers on market days. It offers easy access to stories published on Moneycontrol Pro and gives a little extra by setting out a context or an event or trend that investors should keep track of.

The news should come as no surprise as the global playbook for COVID-19 lockdowns has been similar in one aspect; they eventually wind down as the case count declines. But since China is known to play by its own rulebook, an official announcement carries a lot more weight than in other countries where signs of a sustained decline in cases was enough to cheer investors.

Shanghai announced plans to relax lockdowns and an end to the lockdown from Wednesday as the situation comes under control. Beijing too announced some relaxations to mobility in eight out of the 16 districts that have not seen community cases for 16 consecutive days. Eventually, Beijing too could see lockdowns end. Sure, there are other regions where cases have spread and are in various stages of a lockdown, but the fact that two major economic centres are reopening brings hope to investors of a recovery.

Economic data coming out of China shows an adverse effect of these lockdowns, which is also affecting supply chains and creating shortages elsewhere in the world. PMI data later this week will give a glimpse of how it hurt activity in May. The relaxations may even be a counter to the growing discontent among the people at the hardships they are facing due to the country’s zero-COVID policy. In Eastern Window, a weekly peek into the most important issues pertaining to China, we look at the political implications of premier Li Keqiang’s statements expressing concern over the economy.

Stocks are up smartly today, closing 1.9 percent higher today, perhaps because one of the big concerns among investors was the impact of a prolonged China slowdown. The Hang Seng was up by 2.2 percent. The winding down of lockdowns and signs that the government will provide monetary and economic stimulus measures to revive growth give confidence that one big fear can be set aside.

But another one is the continuing conflict in Ukraine, as Russia’s invasion has crossed three months and there’s still no sign that it’s going to end any time soon. The question investors may have is what’s the end-game here? The Financial Times has done a deep-dive into what is America’s end-game here. After all, the US is providing money (commitment of $54 billion), weapons and intelligence, which is sustaining the Ukrainian defence. What does the US want? “According to recently drafted internal talking points from the US National Security Council viewed by The Financial Times, Washington “seeks a democratic, sovereign, and independent Ukraine” and aims to make sure Russia’s effort to dominate Ukraine “ends in a strategic failure”.”

What is this strategic failure is something that the US is not defining at this point. Is it a return to the pre-invasion status quo? Its allies in Europe are also wondering when the conflict will end and the continent can begin move towards a more normal situation. Their energy and food supply lines have got hit too. Do read the piece (free for Pro subscribers) to know what’s at stake.

Investing insights from our research team

What ails Muthoot Finance despite stability in gold prices?

FSN E-Commerce Ventures (Nykaa): What should one do, post the steep correction?

IPCA Labs: Growth outlook primed by domestic business

Cummins India: Moderation in growth, higher valuation can pose near-term risk

Motherson Sumi: Offers significant upside

What else are we reading?

Rahul Gandhi’s Cambridge interview shows how out of touch he is with the mood of the nation

Winter in markets gives RBI a cold; it could get worse

Costlier solar modules — Can RE target survive the shock?

Apollo Hospitals shifts capex focus on delay in digital unit's fund-raising

How data centres could spur a wave of investments in infrastructure

​Technical Picks: USD-INR, Sun Pharmaceutical Industries, Indiamart, Welspun Corp, Zinc and Deepak Nitrite (These are published every trading day before markets open and can be read on the app)

​Ravi Ananthanarayanan
Moneycontrol Pro