HK stocks open higher as Trump hints at trade truce extension and prospect of ‘real deal’ with China

14-Feb-2019 Intellasia | South China Morning Post | 6:00 AM Print This Post

Hong Kong stocks opened higher on Wednesday, mirroring the gains seen overnight in the US after President Donald Trump hinted he may be prepared to let the looming deadline for Chinese trade negotiations slide. The benchmark S&P 500 index rose by more than 1 per cent yesterday.

The Hang Seng Index was trading at 28,206.12, up 0.12 per cent or 34.79 points, on Wednesday morning. The gains in Hong Kong were in line with the benchmark indexes in Japan and Korea, where the Tokyo Nikkei 225 was up 1.33 per cent and the Seoul KOSPI was up 0.38 per cent.

President Trump said on Tuesday he would consider pushing back a March 1 deadline for trade negotiations with China, giving both countries more time before higher taxes are levied on another $200 billion of Chinese imports.

“If we’re close to a deal where we think we can make a real deal and it’s going to get done, I could see myself letting that slide for a little while,” he was quoted by Bloomberg as saying. However, he added that he was “not inclined to do that”.

Trump has previously said any final deal would be brokered between himself and President Xi Jinping in person. His comments have raised more speculation about a potential meeting between the two leaders.

Trump’s remarks came ahead of high-level meetings scheduled for Thursday and Friday, when Chinese vice premier Liu He and central bank governor Yi Gang will meet with US trade Representative Robert Lighthiser, and Treasury Secretary Steven Mnuchin.

They helped the S&P 500 index break through its 200-day moving average on Tuesday, with a gain of 34.93 points, or 1.3 per cent, to 2,744.73, while the Dow Jones rose 372.65 points, or 1.5 per cent, to 25,425.76. The gains in US stocks were also helped by lawmakers saying they had reached an “agreement in principle” on border security funding that would forestall another government shutdown.

China’s benchmarks were mixed on Wednesday morning, however. The Shenzhen Component Index opened 0.55 per cent, or 43.83 points, higher at 8,053.9. The Shanghai Composite Index was flat, as it edged down 0.01 per cent or 0.28 points, to 2,671.61.

Analysts at Bank of Americal Merill Lynch said that while an extension to the ceasefire over trade tariffs may be a short-term positive for market sentiment, it is unlikely to support global trade data. Furthermore, an extension which leads to little meaningful progress may disappoint the market, they warned.

“Ceasefire would mean limited visibility for exporters at a time when inventories are high and global demand weak. This does not bode well for [the] export cycle, especially for manufacturers,” wrote the bank’s foreign-exchange strategist Adarsh Sinha.

For Asian markets today, though, Gordon Tsui, managing director of Hantec Pacific, said the previously negative sentiments surrounding the Chinese and Hong Kong equity markets had been offset to an extent by the comments from Trump last night.

“Tuesday the US stocks rose on the news of the March deadline extension for the US-China trade negotations, the market is signalling that investors are expecting both sides to come to a compromise,” said Tsui.

Leading the gains in Hong Kong was the bourse’s own operator, Hong Kong Exchanges and Clearing (HKEX), which was up 2.22 per cent, at HK$257.6. Morgan Stanley has recently lifted its target price for HKEX to HK$340 from HK$290, maintaining its “overweight” rating.


Category: Hong Kong

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