Hang Seng Index: Tech and Auto Stocks Lead Charge on Trade Deal Speculation

Tariff Tensions Rattle Wall Street Ahead of Crucial Trade Talks

Wall Street faced selling pressure on Friday, May 9, ending a two-day winning streak as investors reacted to renewed tariff rhetoric. The Nasdaq Composite Index closed flat, while the Dow and the S&P 500 declined by 0.29% and 0.07%, respectively.

US President Trump tempered expectations of a US-China trade deal, supporting an 80% tariff on Chinese goods ahead of the weekend trade talks in Switzerland. Talks risked stalling if Washington had insisted on maintaining punitive tariffs.

China Deflationary Pressures Persist Despite Stimulus

On Saturday, May 10, China’s inflation report showed lingering deflationary pressures. Consumer prices rose 0.1% month-on-month in April after falling 0.4% in March. However, prices were down 0.1% year-on-year. Producer prices dropped at a faster pace, reflecting subdued demand despite recent stimulus efforts.

While deflationary pressures could impact demand for Hong Kong and Mainland China-listed stocks, updates from US-China trade negotiations set the tone for the Asian session on Monday, May 12.

US-China Trade Headlines Fuel Risk Sentiment

On Sunday, May 11, the White House announced a trade deal with China. US Trade Representative Ambassador Jamieson Greer stated:

“It’s important to understand how quickly we were able to come to agreement, which reflects that perhaps the differences were not so large as maybe thought.”

In contrast, China’s Vice Premier He Lifeng reportedly said both sides agreed to establish a ‘China-US trade consultation mechanism’. However, he made no mention of tariff relief.

Brian Tycangco, editor at Stansberry Research, commented:

“So far all I’m seeing is a trade deal to have a line of communication to discuss trade further. It’s irresponsible to try to sell this as anything far reaching. But if the details announced later include a pause in tariffs, along with mention of fentanyl, markets will rally. Then again, a pause in tariffs will ensure that companies are not going to make any long-term plans to reshore/friend-shore their supply chains.”

Market reaction will depend heavily on deal specifics. A zero-tariff agreement could lift risk appetite and drive demand for Hong Kong and China-listed equities.

Hang Seng and Mainland China Markets Tread Carefully Ahead of Trade Talks

On Monday, May 12, Asian equity markets reacted positively to the weekend’s trade headlines. The Hang Seng Index rallied 1.38%, with tech stocks leading.

• The Hang Seng Tech Index rose 1.87% while the Hang Seng Mainland Properties Index gained 0.55%.
• Tech giant Alibaba (09988.HK) jumped 1.73%
• Auto stocks contributed, with Geely Automobile (00175.HK) surging 4.79%,

Mainland benchmarks also posted gains. The CSI 300 and Shanghai Composite rose 0.53% and 0.33%, respectively, amid easing trade tensions.

Nikkei 225 Advances Amid Trade Optimism

Japan’s Nikkei 225 rose 0.17% on Monday morning amid US-China trade developments. Improving risk sentiment weighed on Yen demand, sending the USD/JPY pair up 0.47% to 146.049. A weaker Yen may lift export competitiveness and corporate earnings.

Softbank Group (9984) rallied 1.43%, while Nissan Motor (7201) and Sony Corp. (6758) posted modest gains of 0.09% and 0.30%, respectively.

ASX 200 Rises on Tariff Relief Hopes

Australia’s ASX 200 advanced 0.41% in morning trade, with mining and oil stocks contributing to the gains.

BHP Group Ltd. (BHP) and Rio Tinto Ltd. (RIO) rallied 2.05% and 1.40%, respectively, as iron ore spot prices climbed 1.01% on trade-related optimism. Woodside Energy (WDS) advanced 1.62% on easing fears of tariff-triggered demand shocks.

Meanwhile, stronger risk appetite weighed on gold prices. Prices fell 1.84% in early trading, dragging Northern Star Resources (NST) down 1.26%.

Outlook: Trade Deal Details in Focus

Markets will closely monitor the US-China trade deal specifics today. A zero-tariff trade deal or even a temporary pause on levies could boost risk appetite and sink demand for safe havens. However, a high-tariff deal or extended talks without tariff relief could impact risk sentiment.

If tariff uncertainty persists, the People’s Bank of China may step in with fresh stimulus pledges. Traders should remain alert and responsive to headlines on trade and central bank responses.

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