Investors are eyeing China’s neighbors as the recovery from ‘zero-Covid’ slows

China’s lackluster economic recovery since emerging from strict “zero-Covid” lockdowns has caused weaker sentiment toward the country, prompting investors to look for alternative options — like its near neighbors.

In particular, stock markets in Japan, South Korea and India have all been major beneficiaries of the disappointment from China’s reopening, highlighted by softer-than-expected data from the world’s second-largest economy.

“Amid China weakness, investors have looked elsewhere in the region for opportunities,” Goldman Sachs Chief Asia-Pacific Economist Andrew Tilton said in a Friday research note, adding that Japan “is in the limelight” while India has “also returned to focus in recent months.”

The Nikkei 225 is in bull market territory, up by more than 23% year-to-date thanks to garnered interest from foreign investors, including Berkshire Hathaway’s Warren Buffett.

India’s Nifty 50 index has rallied nearly 7% so far this quarter and pared all of its losses from its March low, while South Korea’s Kospi index has risen 18% year-to-date.

That shows a stark contrast to a sell-off seen in the Chinese stock market. The CSI 300 index, which measures the largest companies listed in Shanghai and Shenzhen, has fallen 5.29% quarter-to-date and has erased all of its gains seen earlier in the year, when stocks rallied on reopening momentum.

The Hang Seng index also touched bear market territory last month and is down nearly 2% year-to-date, Refinitiv data shows.