(Bloomberg) -- Hong Kong stocks jumped as expectations grew that the government will further relax Covid restrictions that have weighed on the city’s shares and its economic outlook.
The Hang Seng Index rose 3.4%, erasing Wednesday’s selloff, while a gauge of Chinese tech stocks trading in the city rallied 6.6%. A Bloomberg gauge of Macau casino shares surged more than 10%.
Read: Hong Kong Stocks Rebound on Report City to Ease Covid Rules
The market upswing followed a local media report that Hong Kong is considering scrapping its outdoor mask mandate and easing test requirements for inbound travelers. In a briefing after markets closed, health officials said isolation period for Covid patients and close contacts will be reduced to five from at least seven days, while adding that most Covid restrictions will remain until Dec. 28.
Hong Kong has been battling to keep its status as a financial hub in the region, gradually reopening its border in a bid to revive its economy and markets. Combined with moves by Chinese authorities to soften their Zero Covid stance, investors are becoming more optimistic over the outlook for shares in the region.
“As China relaxes policies, it gives room for Hong Kong to relax as well, as one of the first major border reopenings will be between the mainland and Hong Kong,” said Marvin Chen, an analyst at Bloomberg Intelligence. “This will be a boost for the local Hong Kong economy which has struggled in the absence of mainland arrivals.”
On Wednesday, China further jettisoned key tenets of its virus elimination strategy, including forcing infected people into quarantine camps.
Once one of the world’s worst performing benchmarks, the Hang Seng Index has surged 32% since the end of October, trimming losses for the year to about 17%. In a Dec. 7 note, Nomura Holdings Inc. strategists upgraded their views on the city’s shares to neutral from underweight, citing benefits expected from tourism recovery as China reopens.
Read: Nomura Turns More Bullish on Asia Stocks, Upgrades Korea and HK
--With assistance from Abhishek Vishnoi.
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