Three stocks to watch during the China reopening

China's rapid retreat from its Covid Zero strategy in recent weeks to "living with Covid" has caught many by surprise.

After an initial burst of China reopening optimism, a more cautious tone is in place as evidence of a bumpy reopening emerges. Disregarding the official numbers, which show a low number of cases, 60% of the Chinese population is expected to contract Covid over the next three months.

What to expect

Putting aside the human cost, the China reopening is also receiving support from soothing regulatory and economic policies, which is expected to boost growth in 2023 significantly.

From a sluggish 2.5% (4Q/4Q) growth in China is expected to rebound above 5% in 2023. The bulk of the rebound will come during the year's second half as the reopening gains traction following an initial hit to consumption in Q1.

The countries most leveraged to the reopening in China from a goods trade and travel perspective and from cashed-up Chinese consumers are Hong Kong, Singapore and Thailand. The spillover into the commodity space will benefit oil-producing countries as well as Australia for its exports of iron ore, copper etc.

With this in mind, we look at the following three stocks that are well placed to benefit the China reopening.

Three stocks to watch

• Alibaba

Alibaba is one of the world's largest retailers and e-commerce platforms. The share price of Alibaba has fallen dramatically in recent years from a high of $319.32 to a low of $58.01 in October, partially due to a crackdown on Chinese internet giants by regulators.

However, with supportive economic policy in place and Chinese authorities pivoting to a pro-business stance, the share price of Alibaba has an upside towards the $125.84 high of July this year.

Alibaba weekly chart

• Baidu

Baidu is a massive Chinese technology company often described as the Google of China with an AI arm attached.

The share price of Baidu has suffered as part of the global rerating of tech stocks in 2022 and as sluggish Chinese growth weighed on advertising revenues.

Based on an expected pickup in China's growth trajectory, and supported by cashed-up Chinese consumers, the share price of Baidu could rally back towards its early July 2022 high of $156.77.

Baidu weekly chart

• HSBC

HSBC is the largest bank in Hong Kong by assets and is well positioned to leverage off the reopening in China, which should feed through into the bank's revenues in 2023.

If the share price of HSBC can see a sustained break above resistance at $48.00, there is little in the way of resistance until the sequence of highs around $52.00 from the middle of this year.

HSBC weekly chart

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