Marketmind: Reopen Sesame

FILE PHOTO: A woman gets tested at a nucleic acid testing site, as coronavirus disease (COVID-19) outbreaks continue in Shanghai

By Jamie McGeever

(Reuters) - A look at the day ahead in Asian markets from Jamie McGeever.

Wall Street slumped on Monday, battered by the old 'good news is bad news' adage following unexpectedly strong U.S. service sector activity figures, which should set a negative tone for Asian markets on Tuesday.

But could Asia be gathering some independent, locally-driven positive momentum of its own?

Things are moving in China as it starts loosening its 'dynamic zero-COVID' policy following unprecedented protests recently, although how far it will go and whether it will satisfy investors' hopes remains to be seen.

More cities announced an easing of coronavirus curbs on Sunday, and as many as 10 new easing measures may be announced as early as Wednesday.

This follows comments last week from Chinese President Xi Jinping, according to EU officials, that the dominant Omicron variant of the virus - as opposed to the more lethal Delta variant - should pave the way for further relaxation.

Also last week, Sun Chunlan, China's top pandemic official, suggested the central government was rowing back on the zero-COVID policy.

This is putting a fire under Chinese assets, and prompting many analysts to look on 2023 in a more positive light.

Morgan Stanley updated its China equity recommendation to overweight, citing "multiple positive developments alongside a clear path set towards reopening," while Standard Chartered and Nomura have also turned cautiously optimistic.

Chinese stocks jumped 2% and Hong Kong stocks surged 4.5% on Monday, and the yuan rallied through the closely watched 7-per-dollar level. All hit multi-month highs.

Chinese yuan - trade-weighted and vs $ https://fingfx.thomsonreuters.com/gfx/mkt/lbpggnazjpq/YUAN.jpg

The yuan has tumbled almost 10% this year, easily on track for its worst year since Beijing revalued the currency and shifted to a more flexible FX regime in July 2005.

That said, its recent rebound has been equally powerful. Last week's 2% rise was its best weekly performance since 2005, and it appreciated a further 1.3% on Monday. It has only posted three bigger daily rises since 2005, and two of them were in the last two months.

On the data front, eyes on Tuesday turn to Australia, where the central bank is expected to raise rates by 25 basis points to more than 3% for the first time in a decade. That would be the third quarter-point hike in a row, following four half-point increases.

Three key developments that could provide more direction to markets on Tuesday:

- Australia interest rate decision

- Australia current account (Q3)

- India trade (November)

(Reporting by Jamie McGeever in Orlando, Fla.; Editing by Deepa Babington)