Hong Kong Stocks Rally As Recent Developments Ease Tensions

China Stock Market
A screen on the trading floor at the New York Stock Exchange (NYSE) displays news of stocks rallying after a statement by U.S. President Donald Trump (Photo: Reuters / Andrew Kelly)

Global markets reacted positively this week as both the United States and China made new progress in possibly putting an end to the now year-long trade war. The moves by both countries have managed to quell down fears of a prolonged trade war, resulting in a boost to some of China's major economic indexes.

China's Hang Seng Index had the most significant reaction this week with an upward movement of as much as 1.8 percent. The index closed at 27,159.06 points yesterday, its highest level since August 1.

A number of major stocks in Hong Kong also saw marginal increases this week. HSBC's stock ended with a 3.1 percent increase, while Hang Seng Bank saw a 4.6 percent bump. China Construction Bank also saw its stock prices rise by 2.8 percent, while the Bank of China ended with a 3.7 percent gain.

The boost was primarily due to a boost in investor confidence involving a likely positive outcome of the ongoing trade dispute between two of the world's largest economies. The improved outlook prompted some investors to quickly snap up key Chinese banking and property stocks sending indexes higher.

According to analysts, the recent development in the trade dispute has marginally increased the appetite of investors for banking stocks. These types of stocks typically have performances that track closely to economic activity, which essentially makes them react immediately to economic and political development.

While the recent developments had some positive effects on equities, it, unfortunately, did not manage to get a number of indexes into the green. The CSI 300, which tracks blue-chip stocks, still ended in the red this week, albeit with lower losses this time around. The CSI 300 closed with a 0.7 percent decline, ending at 3,930.1. Meanwhile, the Shanghai Composite Index closed 0.4 percent down, ending at 3,008.81.

The increase in investor outlook was heavily boosted by China's recent action on Wednesday. China's government revealed that it will be exempting up to 16 types of products from its planned first round of tariffs on US imports. The move was made as the two countries prepare for their planned negotiations in Washington next month.

China announced that it will effectively be removing the items from its list of taxable goods starting next Tuesday. According to the country's Customs Tariff Commission of the State Council, the exemption will have an effective date until September 2020. The exemption will apparently be removed or extended depending on the outcome of the negotiations until then.

As a proverbial icing on the cake, state-run newspaper Global Times announced on social media that China will soon be announcing new measures aimed at mitigating the impact of the ongoing trade war. The unspecified measures will apparently benefit companies from both sides.

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