Zero-COVID policy and stock market sectoral performance in China

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With the outbreak of COVID-19, the Chinese government implemented the “zero-COVID” policy as a measure to curb the spread of the virus. The different measures of the policy include widespread testing, contact tracing, and strict quarantine and isolation protocols. In view of recent changes in COVID-19 trends and other economic indicators, the Chinese government withdrew significant provisions of the zero-COVID policy in China. The present study investigates the sectoral performance of the Chinese stock market after the withdrawal of the zero-COVID policy. The study considers eighteen sectoral indices of the Shenzhen Stock Exchange of China as a sample and applies the event study methodology to study the impact of the policy withdrawal on the stock prices performance. The results of the study indicate that sectors such as hotel, consumer staples, the financial sector, real estate, media, and culture have reported significant positive movement after the withdrawal of the zero-COVID policy, while other sectors such as consumer discretionary, energy, healthcare, information technology, manufacturing, mining, technology, telecom, transportation, utilities, wholesale, and retail have shown insignificant reactions. These results also indicate that when the COVID-19 outbreak happened in China, different sectors of the economy reacted negatively except the retail and wholesale sectors, while with the withdrawal of the zero-COVID policy by the Chinese government, the reaction of investors is optimistic as different sectors are reporting either positive reactions in the stock price movement or no reaction.

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    • Figure 1. Average stock price changes for different sectors
    • Table 1. Abnormal returns and t-statistics of different sectors of China pre-event to event and event to post-event (withdrawal of zero-COVID policy)
    • Table 2. Abnormal returns and t-statistics of different sectors of China pre-event to post-event windows (withdrawal of zero-COVID policy)
    • Conceptualization
      Prashant Sharma, Surender Kumar
    • Data curation
      Prashant Sharma
    • Investigation
      Prashant Sharma
    • Methodology
      Prashant Sharma
    • Software
      Prashant Sharma
    • Writing – review & editing
      Prashant Sharma
    • Formal Analysis
      Surender Kumar
    • Supervision
      Surender Kumar
    • Validation
      Surender Kumar
    • Writing – original draft
      Surender Kumar