Shanghai leads Asian market rally as US delays China tariffs

Investors looking at computer screens showing stock information at a brokerage house in Shanghai, China, on Sept 7, 2018.
Investors looking at computer screens showing stock information at a brokerage house in Shanghai, China, on Sept 7, 2018.PHOTO: REUTERS

HONG KONG • Shanghai surged more than 5 per cent yesterday, leading a rally across Asian markets after United States President Donald Trump said he would delay a hike in tariffs on Chinese goods, citing "substantial progress" in trade talks and fuelling hopes of an end to the long-running stand-off.

Optimism over the talks had already provided support to global equities, spurring a rally last month and this month, but Mr Trump's comments gave extra ammunition to investors to ramp up buying.

The news also fired currency markets, with the yuan extending gains to a seven-month high, while other high-yielding, riskier units were also up against the US dollar.

Mr Trump said on Twitter that the US "has made substantial progress in our trade talks with China on important structural issues including intellectual property protection, technology transfer, agriculture, services, currency and many other issues".

He added: "As a result of these very productive talks, I will be delaying the US increase in tariffs now scheduled for March 1."

Mr Trump's tweeted remarks are the clearest sign yet that the US and China are moving towards a deal to end a trade war that has gone on for months, dragging on global growth and disrupting markets.

Mr Trump also said he planned to hold a summit with his Chinese counterpart Xi Jinping at his Mar-a-Lago estate in Florida to sign a deal.

 
 
 

China's Xinhua news agency added that both sides had "made substantial progress on specific issues" including on transfer of technology and intellectual property.

Chinese blue chips hit their highest in eight months on the back of a 6 per cent gain, their biggest daily increase since July 2015.

Hong Kong and Tokyo ended 0.5 per cent higher. Sydney put on 0.3 per cent, while Seoul was 0.1 per cent higher, Taipei added 0.7 per cent and Jakarta rose 0.4 per cent.

Singapore's Straits Times Index, however, was little changed, inching up 2.45 points to 3,272.35.

The gains in Asia followed another positive lead from Wall Street, where the Dow enjoyed its ninth straight weekly gain - the longest streak since May 1995.

"This is a sigh of relief," said Mr Ben Emons managing director for global macro strategy at Medley Global Advisors . "Markets will still keep a level of caution, but this news is encouraging," he told Bloomberg TV.

The upbeat sentiment lifted high-risk currencies, with the yuan hitting its highest level against the US dollar since last July, while South Korea's won, the Australian dollar and the Indonesia rupiah were well up.

Forex traders will be closely watching speeches this week from top Federal Reserve officials - including chairman Jerome Powell's appearance in front of lawmakers - hoping for clues about its policy plans.

Wall Street "will be looking for soothing comments about the future size of the balance sheet - the bigger the better - and insights into future rate hikes", said senior market analyst Jeffrey Halley of Oanda.

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A version of this article appeared in the print edition of The Straits Times on February 26, 2019, with the headline 'Shanghai leads Asian market rally as US delays China tariffs'. Print Edition | Subscribe