China's COVID policy is top of mind for investors as unrest rattled markets last week. Here are 5 things they're watching as Beijing signals willingness to loosen some restrictions.

From eyeing energy stocks to preparing for Xi Jinping dig in on his COVID policy, here's what some market experts are monitoring.

• Chinese cities have loosened COVID restrictions in the wake of mass protests, lifting Chinese stocks. 
• But market watchers are still preparing to see if China is ready to announce a full reopening of its economy. 
• Here are five things experts say they're watching in China after protests shook the market. 

Chinese equities finished higher last week after cities throughout the country relaxed some strict COVID-19 restrictions, but questions remain whether the government will fully scrap the zero-COVID policy it put in place after the outbreak began in 2019.  

Protests in at least 17 cities erupted last week after 10 people died in an apartment fire in the city of Urumqi, with local residents angered by the building being blocked off by lockdown measures. Protestors, in a rare display of dissent against China's authoritarian government, called for President Xi Jinping to resign.  

China's top pandemic official last week appeared to signal a softening in the zero-COVID policy but the government has yet to pledge a comprehensive step-down. Hong Kong's Hang Seng Index climbed 6.3% and the Shanghai Composite gained 1.8% last week but each remained sharply lower for 2022, down 20% and 13%, respectively.

"Hopefully ... the Chinese government will start to unlock a little bit more. But knowing China, they have a habit of keeping a tight fist, "Darrell Martin, founder and CEO of Apex Trader Funding, a proprietary trading platform, told Insider. 

Retail investors should be prepared to move defensively should Beijing's decisions on zero-COVID policy go against their respective positions, Martin said. 

"I think you definitely need to learn how to trade short in this market. That's something that many retail traders are foreign to – where they can sell first and buy second," he said. "There are short ETFs … and for more active investors, they can short the market in  a regular trading account or investing account."  

Here's what some market experts are looking at as global investors watch for developments surrounding the Chinese government's zero-COVID stance. 

More crackdowns, more market losses. 

Emerging markets investing legend Mark Mobius said last week that Chinese stocks may come under further pressure in the face of the government's response to dissent. 

"It's clear to me that Xi cannot tolerate any protests, so there will be a very tough crackdown on any protesters," Mobius told Bloomberg TV. "More people will be arrested and they will probably go further in terms of population control in many areas."

"So if you have that kind of scenario, then you've got to consider that the market will probably not do that well in the short term," he added.

FOMO is back in China 

The "recent pickup in China equity inflows … suggests the fear of missing out is back," Emmanuel Cau, European equity analyst at Barclays, wrote this week. "China mobility in 2022 is now lower than it was in 2020, when the pandemic started, while it is the opposite for Europe and US," he wrote. 

"So while reopening may not be a smooth process, all else equal, it seems reasonable to expect a positive growth impulse, or less growth drag, from zero-Covid next year in China compared to this year, in our view." 

Metals prices to get a lift 

A China reopening would contribute upside potential for certain metals, Bank of America said, noting China accounts for 50% of global metals demand. 

"A second leg higher in the Fed's tightening cycle in 2H23 remains a key downside risk to commodity prices, particularly gold. Yet we expect Chinese economic activity to pick up firmly as Zero Covid policies are gradually eased lending support to the commodity complex," wrote Francisco Blanch, head of global commodities at BofA. 

The bank said it's increasingly constructive on transition metals like copper as Chinese spending on infrastructure and its electrical grid should combine with rising sales of electric vehicles. Copper could rise to $12,000 a ton next yea and aluminum may reach $2,738 a tonne.  

Position for China's re-opening 

Being bullish on energy stocks in the way to be positioned if China were to "truly" reopen its economy in the second quarter of 2023, Anastasia Amoroso, chief investment strategist at iCapital, wrote in a note. 

The "country's traffic congestion, airline bookings and flights, and overall mobility should [recover] meaningfully, supporting more demand for oil in an otherwise constrained supply environment," she said. 

Brent crude oil traded above $85 a barrel on Friday and has lost about 13% over the past month. The S&P 500 energy sector has risen modestly over the past month but it's zoomed up 64% during 2022. 

China policy, after all, is "impossible to predict" 

Activist short-seller Carson Block said this week on CNBC that China has not been outlining its economic policy goals and investors need to price in such risk. 

The founder of Muddy Waters Research said projections from Wall Street investment banks about China's next COVID policy moves are viewed from the "prior lens" of a government that was open to foreign investment and raising its citizens' standards of living. 

"You have to understand that nobody has an edge as to predicting China policy anymore. The guy you know who's got lots of 'guanxi' or relationships in China? No, that doesn't matter anymore," Block said. "So you have to price in to what you're willing to pay the understanding that you wake up one morning and [say], 'It's down 90%.' Because that's what China is now. It is impossible to predict on a macro level."