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Stock price reactions to reopening announcements after China abolished its zero-COVID policy

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Listed:
  • Chang, Zheng
  • Ng, Alex Wei Fung
  • Peng, Siying
  • Shi, Dandi

Abstract

As global economies strive for post-COVID recovery, stock market reactions to reopening announcements have become crucial indicators. Though previous research has extensively focused on COVID’s detrimental impact on stock markets, the effects of reopening remain underexplored. This study provides the first causal analysis of the effect of easing restrictions on Chinese firms’ stock prices following the end of China’s three-year Zero-COVID policy. Utilizing regression-discontinuity design, we find that most relaxed measures had minimal or negative impact. However, stock prices jumped 1.4% immediately after the full reopening announcement on December 26, 2022. Using a difference-in-differences approach, we also note a 1.6% increase in the stock prices of Mainland China firms relative to firms in other districts on the Hong Kong stock market two months post-reopening. Our findings offer key insights for policymakers and contribute significantly to academic discourse on the causal relationship between reopening policies and stock market performance.

Suggested Citation

  • Chang, Zheng & Ng, Alex Wei Fung & Peng, Siying & Shi, Dandi, 2024. "Stock price reactions to reopening announcements after China abolished its zero-COVID policy," LSE Research Online Documents on Economics 121414, London School of Economics and Political Science, LSE Library.
    • Handle: RePEc:ehl:lserod:121414
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    File URL: http://eprints.lse.ac.uk/121414/
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    References listed on IDEAS

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    1. Bai, Chenjiang & Duan, Yuejiao & Fan, Xiaoyun & Tang, Shuai, 2023. "Financial market sentiment and stock return during the COVID-19 pandemic," Finance Research Letters, Elsevier, vol. 54(C).
    2. Dehua Shen & Wei Zhang, 2021. "Stay-at-Home Stocks Versus Go-Outside Stocks: The Impacts of COVID-19 on the Chinese Stock Market," Asia-Pacific Financial Markets, Springer;Japanese Association of Financial Economics and Engineering, vol. 28(2), pages 305-318, June.
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    JEL classification:

    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)

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