Following a strict zero-COVID policy, the Chinese government has relaxed restrictions, despite an elderly population with a disproportionate number of people who have yet to receive three doses of a COVID vaccine. While the prospect of a global economic powerhouse reopening has upside potential for commodity-exporters such as Australia, concerns about hospital capacity and rising infection rates going into the Chinese New Year, are contributing to investors’ uncertainty.

AMP chief economist Shane Oliver also expects the market to open in the red on Tuesday and for conditions to remain “fairly rough” in the opening months this year.

“There’s always uncertainty around this time because of low volumes,” he said. “But there’s likely to be a negative start to the year because of concerns around surging COVID cases in China, interest rates which weigh on profit expectations, and fears of recession which will stay for some time. I suspect we’re in for a rough ride for a while.”

However, commodity companies may be spared the initial drop in share values, Oliver said, because “commodity prices, such as those of iron ore, are holding up well.”

Even as people return from their holidays, Liu anticipates a fairly anaemic market over the next few months.

“The market will go downwards to begin with,” she said. “There’ll be a bit more focus on earnings as the reports come out, but they’re not going to get people excited.

“There are earnings downgrades to come, consumer spending has faltered and Christmas hasn’t been as big as expected.”

But both Liu and Oliver said there would likely be improvement after the March or June quarter this year.

“As the year proceeds, markets will start to look healthier because inflation will start to diminish, taking pressure off interest rates,” Oliver said.

“China’s reopening will probably be a bit like what we experienced with the Omicron wave here. There should be more demand for our commodities from China and better supply of goods into Australia from March onwards.”

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Despite a drop in the index last year, the Australian sharemarket has been on a positive trajectory for most of the last decade, standing 51 per cent higher on December 30, than it was at year’s end 10 years ago.

With Billie Eder