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

This study provides the first causal analysis of the effect of easing COVID-19 restrictions on Chinese firms' stock prices following the end of China’s three-year Zero-COVID policy. Using regression-discontinuity design, the authors 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. A difference-in-differences approach reveals 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. The findings offer key insights for policymakers and contribute to understanding the causal relationship between reopening policies and stock market performance.

Zheng Chang, Alex Wei Fung NG, Siying Peng, Dandi Shi