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Covid-19: China stocks bounce off 2-year lows on expectations of easing measures

Beijing expands mass testing from one district this week to most of the city of nearly 22 million

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China stocks recovered from two-year lows on Tuesday, on hopes of more easing measures to reduce the economic impact from a Covid-19 outbreak in the country, with rising cases in Beijing dimming prospects for the world's second-largest economy.

The CSI300 index rose 1.4 per cent to 3,868.63 at the end of the morning session, while the Shanghai Composite Index gained 0.9 per cent to 2,955.93.

The Hang Seng index added 1.9 per cent to 20,244.96. The Hong Kong China Enterprises Index gained 2.7 per cent to 6,866.81.

Beijing swiftly expanded its Covid-19 mass testing from one district this week to most of the city of nearly 22 million, adding to expectations of an imminent lockdown similar to Shanghai's.

"This week, market attention will likely shift from Shanghai to Beijing, as a worsening Covid-19 situation in China's capital city could have a more profound influence on the future path of zero-Covid strategy," said Nomura in a note.

Analysts also worried that larger scale of outbreaks and China's adherence to zero-Covid policy would further disrupt supply chains, cloud growth outlook and dent investor sentiment.

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China should attach great importance to the economic impact from domestic and external factors that have exceeded expectations, Premier Li Keqiang said, adding that policy measures that have already been drawn up need to be implemented in the first half to stabilise jobs, prices and fundamentals.

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