Chinese shares continued their upward momentum on Friday, with key indexes on track for a four-day rally. This positive performance came as expectations for increased economic stimulus in China and hopes for an eventual trade agreement with the United States overshadowed the impact of President Donald Trump’s 145% tariffs on Chinese goods.
A primary indicator of Hong Kong-listed Chinese stocks surged by as much as 2.7%, after fluctuating between gains and losses earlier in the day. The CSI 300 Index, which tracks stocks listed on mainland China’s exchanges, reversed its earlier losses, climbing by 0.4%. Both benchmarks outperformed a broader Asian market index.
The market’s optimism is driven by speculation that China will introduce new economic measures to support growth. Investors are awaiting a meeting of China’s top leaders scheduled for Thursday, where additional stimulus options are expected to be discussed. Furthermore, there is renewed hope that the United States and China may find common ground on trade, following indications from President Trump that he is open to offering tariff exemptions for certain countries or companies.
While investor sentiment was somewhat dampened in the morning session, following a White House clarification on Thursday that total tariffs on China had reached 145%, up from earlier levies, the afternoon showed signs of recovery. The US tariffs are far above the levels many economists fear could devastate US-China trade.
“Stocks are rising on the potential easing of US-China tensions,” said Steven Leung, executive director at UOB Kay Hian Hong Kong. “Investors are also anticipating that China will introduce more supportive measures after recent meetings with top officials.”
Trump expressed optimism on Thursday, stating that trade negotiations were “very close” and signaling that China would eventually return to the negotiating table.
The latest increase in US tariffs came in response to Beijing’s announcement on Wednesday that it would impose an 84% levy on all US imports, after Trump had raised tariffs on Chinese goods to 104%. In turn, Chinese authorities have vowed to “fight to the end” against the US tariffs, while signaling openness to further dialogue. Additionally, the Chinese government has been taking steps to stabilize its stock market, with state-backed funds purchasing stocks and exchange-traded funds (ETFs).
Despite the positive market movement, the ongoing tension between the world’s two largest economies has led some global investors to scale back their exposure to Chinese stocks. On Wednesday, three major US-listed ETFs tracking Chinese equities saw significant selloffs, with nearly $1 billion in shares being offloaded in just one day.
However, despite the recent rally, the Hang Seng China Enterprises Index is still down 6.5% for the week, marking its worst performance since October.
Nomura Holdings strategist Chetan Seth cautioned that a prolonged trade war could lead to underperformance of Chinese stocks compared to their regional peers. “We believe HK/China equities are not out of the woods yet and may continue to lag the region as US-China trade tensions show no signs of abating,” Seth said in a note Thursday.
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