Hong Kong and China stocks end higher on US-China trade detente hope, interest rate outlook

Hong Kong and China’s stocks both advanced on Wednesday, as traders bank on the chance of a US-China trade detente from the G20 meeting and a pause in raising borrowing costs by the Federal Reserve.

The Hang Seng Index rose 1.3 per cent and the Shanghai Composite Index added 1.1 per cent for the first gain in five days. Tencent Holdings gained the most in almost two weeks in Hong Kong, while telecom and consumer companies led the pack of gainers in the mainland.

US President Donald Trump was hopeful of a breakthrough with his Chinese counterpart Xi Jinping over dinner on Saturday evening in Buenos Aires, Larry Kudlow, Trump’s top economic adviser, told reporters on Tuesday during a briefing before the Group of 20 meeting. But the US was also ready to impose more tariffs on Chinese imports if the upcoming talks fall apart, he said.

Traders’ attention was also gripped by comments by vice-chairman of the Fed Richard Clarida before chairman Jerome Powell’s speech on Wednesday. At the end of an address to a conference in New York, Clarida said he supported “gradual policy normalisation”.

“The risk appetite is rising a bit as there are signs that both China and the US want to strike a deal to ease the current trade dispute,” said Wang Chen, a partner with Xufunds Investment Management in Shanghai.

“The market now expects a pause in interest rate increases in the US early next year.”