October 14, 2019 / 8:44 AM / a month ago

HK stocks buoyed by trade war truce, though deal uncertainty, economic worries curb gains

HONG KONG, Oct 14 (Reuters) - Hong Kong stocks rose on Monday on signs of progress in Sino-U.S. trade talks, but the gains were capped by doubts over the durability of a partial preliminary deal, and lingering worries about China’s economy.

** The Hang Seng index rose 0.8%, to 26,521.85, while the China Enterprises Index gained 0.5%, to 10,507.85 points.

** Investors welcomed signs of an improvement in trade relations between Washington and Beijing after U.S. President Donald Trump on Friday outlined the first phase of a deal to end the trade war with China and suspended a threatened tariff hike due to take effect on Tuesday. ** The emerging deal, covering agriculture, currency and some aspects of intellectual property protections, would represent the biggest step by the two countries in 15 months to end the tit-for-tat tariff war, though Trump said it could take up to five weeks to get a pact written.

** Nomura strategist Ting Lu said that the near-term agreement did little to suggest that the two sides had bridged fundamental differences on trade, China’s structural policies and national security that have been growing challenges in recent years.

** “We still see high uncertainty in officially reaching the ‘phase one’ deal,” Lu wrote in note, adding: “We expect China’s growth to slow at a faster pace in coming months despite the truce between US and China.”

** China’s exports fell at a faster pace in September, while imports contracted for a fifth straight month, pointing to further weakness in the economy and underlining the need for more stimulus as the Sino-U.S. trade war drags on.

** Investors now wait for a slew of economic data this week, including GDP growth, inflation and industrial output for further clues about the Chinese economy. ** J.P. Morgan Asset Management’s chief market strategist Asia, Tai Hui, said that, although the tentative trade deal “should support risk appetite in the near-term, be positive for equities and tighten corporate credit spreads ... market optimism may not be well supported by economic reality.” (Reporting by the Shanghai Newsroom; Editing by Alex Richardson)

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