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  • China’s recovery is taking longer than expected, so Citi is pushing back its stock rebound forecasts

    China’s recovery is taking longer than expected, so Citi is pushing back its stock rebound forecasts

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    Pictured here is a shopping street in Shenzhen, China, on Thursday, March 30, 2023.

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    BEIJING — China’s economic recovery is taking longer than expected, prompting Citi analysts to push back their forecasts for a stock market rebound by three months.

    Instead of June, Citi now expects it will now take until the end of September for the Hang Seng Index to reach 24,000, analysts said in a report Thursday. That’s about 18% above current levels.

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    The Hang Seng Index closed at 20,331.20 on Thursday, up about 2.8% for the year so far.

    “We expect [first-quarter 2023 corporate] results to be on the weaker side as post COVID recovery seems slower than expected,” the Citi report said. It said analysis of 2022 results of 316 Chinese companies found more misses than beats.

    China has reported a modest recovery in economic growth for the first two months of the year. The country ended its stringent Covid controls in December.

    Earnings from Chinese e-commerce giants JD.com and Alibaba have also indicated that consumers remain conservative about spending.

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    However, Tencent’s quarterly results showed businesses were more willing to spend on advertising, especially in the company’s growing video accounts and e-commerce portals.

    Citi said it added Tencent to its to Hong Kong stock picks, along with retailer Topsports and state-owned Sinopharm.

    Sands China, Chow Tai Fook and Air China remain on the firm’s stock picks list.

    The analysts also delayed by three months — to the end of September — their expectations for a rebound in two other Chinese stock indexes.

    For the CSI 300, Citi has a target of 4,500, or about 9% above Friday’s level of near 4,125.

    For the MSCI China index, Citi has a forecast of 78. That’s about 18% above current levels near 66.

    Barkin: It's interesting the Europeans are in China to talk with President Xi, when the U.S. is having trouble doing the same

    Falling exports from slower growth in the U.S. and Europe is weighing on China’s economy, along with a slump in the massive real estate sector.

    Goldman Sachs credit strategy analysts said in a report Thursday they expect Chinese property developers’ high-yield default rate will be 19% this year.

    That’s better than the 46.4% last year, but “still at an elevated level, reflecting the uncertain pace of recovery for the physical property market,” the report said.

    Recovery green shoots

    However, a quarterly People’s Bank of China survey released this week indicated more people in China want to buy houses again, along with greater expectations that home prices will rise.

    China’s movie box office has also started to show some signs of recovery.

    Animated film “Suzume” this month became the highest-grossing Japanese film in China with a box office of more than 650 million yuan ($94.49 million), surpassing that of prior first-place title “Your Name,” according to movie ticketing site Maoyan. Both films were made by the same director.

    Read more about China from CNBC Pro

    The data showed “The Super Mario Bros. Movie” grossed 32.3 million yuan on its opening day in China on Wednesday, a local holiday. That marked the biggest opening for a Hollywood animation since the pandemic began in 2020, Deadline pointed out.

    More foreign movies are now being allowed in China after authorities only allowed a handful of overseas titles to screen during the pandemic.

    China is set to release first-quarter GDP and other economic data on April 18.

    For 2023, Citi expects consumer discretionary and utilities companies to post the greatest growth in earnings per share among Hang Seng Index sectors, while energy and industrials will likely see declines.

    Disclosure: Comcast is the parent company of NBCUniversal and CNBC. NBCUniversal is the distributor of “The Super Mario Bros. Movie.”

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  • New COVID subvariant is now dominant across the U.S., accounting for 43% of all new cases in latest week, CDC says

    New COVID subvariant is now dominant across the U.S., accounting for 43% of all new cases in latest week, CDC says

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    The XBB.1.5 omicron subvariant that has been dominant in the Northeast for several weeks is now officially dominant across the U.S., according to an update from the Centers for Disease Control and Prevention early Friday.

    XBB.1.5 accounted for 43% of all COVID cases in the week through Jan. 14, pulling ahead of BQ.1.1, which accounted for 28.8% of new cases, and BQ.1, which accounted for 15.9%, the data showed.

    Last week, BQ.1.1 was still dominant nationwide, accounting for 33.5% of new cases versus XBB.1.5’s 30.4%.

    In the New York region, which includes New Jersey, the U.S. Virgin Islands and Puerto Rico, XBB.1.5 now accounts for 82.7% of new cases, up from 72.7% a week ago.

    On Thursday, the World Health Organization acknowledged that XBB.1.5, which was first detected in tiny numbers in the U.S. in October, has become the most transmissible variant yet thanks to a growth advantage, and said that it appears to have a greater ability to evade immunity than earlier variants.

    However, the immune-escape data is based on preliminary lab-based studies and not on research in humans. And with the only data to review coming from the U.S., the agency said there’s no information yet on clinical severity.

    XBB.1.5 is similar to its immediate predecessor XBB.1 but has an additional mutation to its spike protein that may be behind its growth advantage. For now, it does not appear to have any mutation that might lead to more severe disease or death, WHO officials have said. The agency is monitoring it along with five other omicron variants.

    On Friday, the WHO updated guidelines on face masks, treatments and patient care in the age of COVID, a reminder that the pandemic is not yet over, even if people are mostly behaving as if it is. Given current global trends, the agency is recommending that people wear face masks when in public settings that are enclosed or poorly ventilated. People who have been exposed to the virus should also wear masks.

    “Similar to previous recommendations, WHO advises that there are other instances when a mask may be suggested, based on a risk assessment,” the agency said in a statement. “Factors to consider include the local epidemiological trends or rising hospitalization levels, levels of vaccination coverage and immunity in the community, and the setting people find themselves in.”

    The WHO reduced its recommended isolation period for COVID patients and said they can end isolation early if they test negative on a rapid test. Patients with symptoms should isolate for 10 days from the start of symptom onset, but the agency has dropped its advice for an additional three days.

    For asymptomatic patients who test positive, the WHO now recommends five days of isolation, compared with 10 days previously.

    The WHO extended a strong recommendation for the use of Pfizer’s
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    +0.29%

    antiviral Paxlovid for patients with mild to moderate symptoms who are at risk of hospitalization.

    The data comes as the seven-day average of new U.S. cases stood at 60,610 on Thursday, according to a New York Times tracker. That’s up 4% from two weeks ago and below the recent peak of 70,508 on Christmas Eve. The daily average for hospitalizations was up 10% to 45,842. The average for deaths was 564, up 61% from two weeks ago. 

    Coronavirus Update: MarketWatch’s daily roundup has been curating and reporting all the latest developments every weekday since the coronavirus pandemic began

    Other COVID-19 news you should know about:

    • The peak of China’s COVID-19 wave is expected to last two to three months and to soon extend over the country’s vast rural areas, where medical resources are relatively scarce, Reuters reported Friday, citing a Chinese epidemiologist. Infections are expected to surge in those areas as hundreds of millions of people travel to their hometowns for the Lunar New Year holiday, which starts Jan. 21. “Our priority focus has been on the large cities. It is time to focus on rural areas,” said Zeng Guang, the former chief epidemiologist at the Chinese Centers for Disease Control and Prevention, according to a report published in local media outlet Caixin on Thursday.

    • Private services offering Chinese travelers access to mRNA vaccines are attracting droves of mainlanders to Hong Kong and Macau, the Guardian reported on Friday, as people seek a booster shot that their government has refused to approve. The government only allowed its citizens to get homegrown vaccines developed by Sinopac and Sinopharm
    8156,
    +6.45%

    throughout the pandemic, but many people are now seeking the greater protection offered by the mRNA vaccines developed by Moderna
    MRNA,
    +2.10%

    and by Pfizer and German partner BioNTech
    BNTX,
    -2.92%
    .

    Tens of thousands of people have resumed travels in and out of China after the country lifted almost all of its border restrictions, ending three years of strict pandemic controls. Photo: Tyrone Siu/Reuters

    • Kansas Gov. Laura Kelly plans to return to work at the Statehouse Friday after learning that a COVID-19 test earlier in the week gave her a false positive result, her office said, the Associated Press reported. Kelly has been working in self-isolation at the governor’s residence since the false positive Tuesday. Her office announced that she had tested positive for COVID-19, and she postponed the annual State of the State address from Wednesday to Jan. 24.

    See also: Sick house: Florida man gets 8 ½ years for using COVID relief to buy lavish 12-acre estate, fleet of luxury cars

    Here’s what the numbers say:

    The global tally of confirmed cases of COVID-19 topped 666.3 million on Friday, while the death toll rose above 6.7 million, according to data aggregated by Johns Hopkins University.

    The U.S. leads the world with 101.6 million cases and 1,099,629 fatalities.

    The Centers for Disease Control and Prevention’s tracker shows that 229.4 million people living in the U.S., equal to 69.1% of the total population, are fully vaccinated, meaning they have had their primary shots.

    So far, just 49.6 million Americans, equal to 15.9% of the overall population, have had the updated COVID booster that targets both the original virus and the omicron variants.

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