After months of speculation, China may finally be on the verge of exiting its zero-Covid policy. This news has sent many Chinese stocks up this morning, including popular meme play GigaCloud Technology (NASDAQ:GCT) stock.
Although the country isn’t likely to fully reopen its economy for months, the government seems to be preparing to ease more Covid-19 curbing measures. This is all the good news that Chinese stocks need to pull back into the green. Hong Kong’s Hang Seng Index is surging this morning, for instance, currently up almost 3% on the news. Meanwhile, as some of China’s largest companies only see slight gains, GCT stock is spiking more than 35%.
Let’s take a look at today’s news and what investors can expect from GigaCloud in the near future.
What’s Happening With GCT Stock?
Since its initial public offering (significant volume following GigaCloud’s trading debut.) in August, GCT stock has taken investors on a wild ride. As InvestorPlace contributor William White reports, shares saw
In the days that followed, GCT stock rode a Chinese meme stock wave that also catapulted names like AMTD Digital (NYSE:HKD) and Magic Empire Global (NASDAQ:MEGL) to the top of Wall Street’s radar. Of course, that craze has since lost momentum. But investors are now likely wondering if the recent news out of China has breathed new life into these companies and their short squeeze potential.
GigaCloud hasn’t reported any company-specific growth catalysts lately. This suggests that the zero-Covid news is driving today’s gains. However, lockdown measure easing is clearly affecting GCT stock much more than its larger peers. For example, Chinese e-commerce giants Alibaba (NYSE:BABA) and JD.com (NASDAQ:JD) were both up less than 1% at one point today — and are now slightly in the red.
GCT has picked up some steam on Twitter as well. Although shares haven’t garnered as much attention on Reddit’s r/WallStreetBets, a resurgence in attention from meme stock traders may certainly be playing a part today.
What Comes Next?
Of course, meme stock surges inevitably fizzle out as traders move on to other companies. But if China continues easing lockdowns, that may provide the boost GCT and other Chinese stocks need to actually turn around and demonstrate reliable growth. The South China Morning Post reports that, according to strategists at Goldman Sachs, China could send stocks up 20% by reopening its mainland economy, giving rise to a multi-month rally.
In a separate note, Goldman Sachs examined the prospect of China’s gradual reopening:
“Our reading is that all the signs are pointing to the beginning of preparation for an eventual reopening, especially given the rising cost of the ‘dynamic zero-Covid’ policy for the economy.”
If China does move to continue reopening, a rally for Chinese stocks seems imminent. And even if that doesn’t trigger another Hong Kong meme stock rally, it will likely boost GCT stock, helping it attract attention from investors outside the meme stock community.
GigaCloud hasn’t demonstrated any actual growth so far, but it is still relatively new to the market. Investors should watch this stock carefully as China begins easing up on its zero-Covid policy.
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On the date of publication, Samuel O’Brient did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.