October 14, 2019 / 4:54 AM / 8 months ago

China, Hong Kong stocks rise on trade optimism

SHANGHAI, Oct 14 (Reuters) - China and Hong Kong stocks rose on Monday as investors cheered signs of progress in the Sino-U.S. trade talks, although worries about prospects of a durable deal between the two economic power houses and China’s economic health capped the upside.

** Both the CSI300 index and the Shanghai Composite Index gained 1.4% by the end of the morning session, to 3,965.38 and 3,014.73, respectively.

** The Hang Seng index added 1.0%, to 26,578.41, while the Hong Kong China Enterprises Index gained 0.9%, to 10,547.74.

** Investors welcomed signs of 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.

** “It’s a shot in the arm for the market,” Guosheng Securities analyst Zhang Qiyao wrote, describing the limited deal as “better than expected”. ** J.P. Morgan Asset Management’s chief market strategist Asia, Tai Hui, said the market optimism might not be well supported by economic reality.

** “We have seen a truce established and then broken, before,” Tai wrote. “CEOs are not going to restart investing again merely because of the latest round of agreement between the two sides. The fundamental outlook for global growth has not changed on the back of the latest announcement.”

** Yang Zhenyu, a strategist at Central China Securities, agreed and predicted that Chinese shares would “open high, but trend lower” this week due to weak fundamentals.

** Investors now wait for a slew of economic data this week, including GDP growth, inflation, industrial output and trade figures, for further clues about the local economy. ** 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. ** On the mainland, financial firms led the gains, as China launched timetable for full financial sector opening. ** Around the region, MSCI’s Asia ex-Japan stock index was firmer by 1.13%. ** The yuan was quoted at 7.0513 per U.S. dollar, 0.53% firmer than the previous close of 7.089. ** As of 04:15 GMT, China’s A-shares were trading at a premium of 30.49% over the Hong Kong-listed H-shares.

Reporting by Samuel Shen, Luoyan Liu and John Ruwitch; Editing by Subhranshu Sahu

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