“Good will be repaid with good, evil will be repaid with evil. It’s not that we won’t do anything, it’s just that the time isn’t ripe.”

– Anonymous graffiti artist; Wuhan, China

Nationwide anti-lockdown protests in China are the top financial news story this morning.

Spontaneous acts of defiance swept the nation after draconian Covid restrictions in the northwest of China left high-rise residents trapped in a deadly fire.

The fate of the world’s second-largest economy hangs in the balance as the ruling communist party must now decide whether to resort to even harsher repression or to finally open up… a decision that will reverberate around global markets.

Long-time Beijing resident, Bloomberg's Tom Mackenzie, summed up what makes this weekend’s uprising unique:

It reminded me of the quote at the top of today’s article, reported by The New York Times’s Chris Buckley as he experienced first-hand the initial lockdown in Wuhan, China in 2020.

“It’s not that we won’t do anything, it’s just that the time isn’t ripe,” Buckley translated graffiti scrawled across a building as saying, as residents faced the first Covid-19 lockdowns at the outset of the pandemic. 

Amid a surge in cases, already exceeding the peak seen in China earlier this year, more and more people are being locked inside and locked out of basic services.

And from the looks of it, the time is ripe.

The question is, how will Chinese President Xi Jinping get out of trouble this time, and what will that mean for markets…

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Your Rundown for Monday, November 28, 2022...

China Has No Plan

Hao Hong, a Chinese equities analyst who has been hopefully predicting a pivot away from the Covid Zero policy, shared this chart of Covid cases and the Shanghai Composite stock index. (The white line shows the national total of positive Covid-19 cases. The yellow line is the benchmark index of mainland Chinese stocks.)

In the short term, whether China opens up and faces the shock of Covid overwhelming hospital capacity or doubles down on harsh lockdowns, it will hammer demand for commodities and prolong supply chain disruptions.

Copper, iron ore and oil prices all took a hit on the rising caseload and unrest.

Other market moves suggest market insiders think China has no plan. Shares of medical equipment makers rallied, while China’s domestic Covid vaccine producers fell with the rest of the stock market.

Hao Hong’s contrarian take, however, is that “the possibility of a rapid spread to reach crowd immunity is underappreciated.”

In other words, whether Beijing likes it or not, China’s going to get back to normal sooner than expected.

But other China analysts expect a harsh crackdown on protests and a continuation of the Covid Zero policy.

And MIT professor Yasheng Huang tells us there’s one stock price to watch that will tell us if China is truly ready to pivot…

Market Rundown for Monday, Nov. 28, 2022

S&P 500 futures are down 0.60% to 4,000.

Oil is down 1.6% to $75 for a barrel of WTI.

Gold is down 0.45% to $1,745.70 per ounce.

And Bitcoin has lost 2% to $16,200.

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