Chinese stocks rise to 2-month high as Mnuchin says trade war ‘on hold’

China agrees to buy more US agricultural and energy products to help narrow what has become a record bilateral trade deficit, the White House said in a joint statement with China following two days of negotiations

PUBLISHED : Monday, 21 May, 2018, 10:42am
UPDATED : Monday, 21 May, 2018, 10:10pm

China’s benchmark stock index finished at its highest level in two months on Monday你after US Treasury Secretary Steven Mnuchin said a potential all-out trade war with China was now “on hold”, after the world’s largest economies agreed to drop their tariff threats while they work on a wider trade agreement.

Hong Kong stocks, however, pared earlier gains amid what analysts said were mounting worries of a higher US dollar and interest rates which have caused outflows from the local currency and triggered intervention by the Hong Kong Monetary Authority to defend the currency peg.

China has agreed to buy more US agricultural and energy products to help narrow what has become a record bilateral trade deficit, the White House said in a joint statement with Beijing following two days of negotiations.

Chinese Vice-Premier Liu He was quoted by the official Xinhua news agency as saying: “This is a positive, pragmatic, constructive and fruitful visit. Both sides have reached a consensus on the healthy development of Sino-US trade relations.”

The Shanghai Composite Index gained 0.64 per cent or 20.54 points to 3,213.84, marking its highest closing level since March 22.

The CSI 300 – which tracks the large caps listed in Shanghai and Shenzhen – advanced 0.47 per cent or 18.18 points to 3,921.24.

The Shenzhen Composite Index climbed 1.05 per cent or 19.27 points to 1,848.06, while the Nasdaq-style ChiNext gained 1.40 per cent or 25.73 points to 1,862.48.

In红Hong Kong, the Hang Seng Index rose 0.60 per cent or 186.44 points to 31,234.35 after gaining as much as 1.34 per cent earlier in the day. The Hang Seng China Enterprises index slipped 0.04 per cent or 5.52 points to 12,349.61.

“The Hong Kong market pared early gains, weighed by concerns over higher US rates and the HKMA’s currency intervention,”said Kingston Lin King-ham, director of AMTD securities brokerage. The Hong Kong Monetary Authority purchased HK$5.99 billion (US$763 million) of the local dollar on Friday to defend the currency peg.

Macquarie said in research report that the US-China joint statement on trade was a positive move, as new tariffs were not imminent, helping to ease market concerns of a trade war. It still lacked details, however, and talks should continue.

A package deal on the final solution is expected to include a plan for China to buy more US goods and services such as energy and agricultural goods, which could initially amount to US$200 billion in value, but comes with the condition that the US should loosen its restriction on hi-tech exports.

A timetable to open up China’s service sector was also expected, especially the financial industry, Macquarie said.

Link Reals Estate Investment Trust rallied 2.15 per cent to HK$68.80. JP Morgan upgraded its target price to HK$77 from HK$67.60 because of the robust rent recovery of the company’s lease portfolio. Sun Hung Kai Properties added 0.71 per cent to HK$128.30.

Ping An Insurance (Group) edged up 0.13 per cent to HK$78.40, AIA Group gained 3.06 per cent to HK$74.20. Hong Kong Exchanges and Clearing advanced 1.16 per cent to HK$262.40.

AAC Technology was 4.67 per cent higher at HK$118.70, while Tencent Holdings eased 0.73 per cent to HK$408.

Health care stocks dropped after last week’s strong rally. Sino Biopharmaceutical slid 3.99 per cent to HK$18.28. Shanghai Pharmaceuticals Holdings, one of the nation’s largest drug makers and distributors, dropped 1.29 per cent to HK$23. The company said it will acquire Takeda AG’s China-based Techpool business for US$144 million. Shanghai Pharma will increase its shareholding in Techpool to 67.14 per cent from 40.80 per cent, giving it absolute control of Techpool, a human urine protein bio-pharmaceutical.