China, Hong Kong stocks gain on Fed, COVID policy pivots



(Updates closing prices)

SHANGHAI, Dec 1 (Reuters) - China and Hong Kong stocks started December on a bullish note, tracking global markets amid expectations that the U.S. Federal Reserve will slow the pace of rate hikes, and signs of some relaxation in China's strict anti-COVID curbs.

China's bluechip index CSI300 .CSI300 gained 1.1% to a two-month high. The Shanghai Composite Index .SSEC rose 0.5%.

Hong Kong's Hang Seng Index .HSI rose 0.7%, after jumping 27% in November in its best month in 24 years.

Asian markets were upbeat following overnight gains on Wall Street, after Federal Reserve Chair Jerome Powell opened the door to a slowdown in the pace of monetary tightening.

Investors are also doubling down on bets that China is moving toward a reopening of its economy by relaxing draconian anti-COVID measures that have hit growth, disrupted life and work, and triggered protests.

Nuno Fernandes, portfolio manager for GW&K's Emerging Wealth Equity Strategy said the impact of the anti-COVID strategy on the economy was becoming too great for the government to accept.

"So our expectation is that they would exit the dynamic zero policy, and that's what we're experiencing now. It's the beginning stages of exiting that policy," he said.

China is softening its tone on the severity of COVID-19 and easing some coronavirus restrictions even as its daily case toll hovers near record highs.

Vice Premier Sun Chunlan, who oversees COVID efforts, said the virus's ability to cause disease was weakening, state media reported. In Guangzhou, authorities in at least seven districts said they were lifting temporary lockdowns.

"Going forward, we believe that Chinese authorities are shifting to a 'living with COVID' stance," ANZ said in a report on Thursday, adding "a full reopening could be possible before next March".

China's consumer stocks .CSICS jumped to a six-week high on optimism over the signs of a wider re-opening.

Consumer companies "will greatly benefit from the re-opening of the economy, and so we're going to see an incredible recovery in profitability for these companies," said GW&K's Fernandes.

Tech stocks in China and Hong Kong also rose sharply following a nearly 10% surge in Nasdaq-listed Chinese stocks .HXC .

China's tech-focused STAR Market .STAR50 rose nearly 1%, while Hong Kong's Hang Seng Tech Index .HSTECH climbed 1.1%.

But COVID testing companies, including Wondfo Biotech 300482.SZ and Labway 301060.SZ , tumbled after the government vowed to respond to public criticism.
Reporting by Shanghai Newsroom; Editing by Simon Cameron-Moore and Raissa Kasolowsky

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