Asian Indexes Retreat as Investors Seek Clarity on US-China Trade Talk Progress

Most of the major Asian stock indexes are trading lower on Tuesday as investors, who bought on Monday in reaction to President Trump’s extension of the deal deadline, suddenly booked profits while asking for more clarity on the progress of trade talks between the United States and China. Investors in mainland Chinese stocks were particularly active sellers after an explosive rally the previous session, however, late in the session, new buyers emerged to turn China’s benchmark index higher.

At 03:39 GMT, China’s Shanghai Index was trading 2972.61, up 11.33 or +0.38%.

Japan’s Nikkei 225 Index was trading 21485.29, down 42.94 or -0.20%. Hong Kong’s Hang Seng Index was at 28823.72, down 135.58 or -0.47% and South Korea’s KOSPI Index was trading 2228.23, down 4.33 or -0.19%.

In Australia, the S&P/ASX 200 Index was trading 6114.60, down 71.70 or 1.16%. Concerns over U.S.-China relations were pressuring prices along with a steep drop in crude oil prices, which drove the energy sector about 0.9 percent lower.

Investors Seek Clarity

The initial reaction to President Trump’s tweet that the United States would delay additional tariffs on Chinese imports originally scheduled to start on March 2 or shortly thereafter was bullish. Furthermore, investors celebrated the news that Washington and Beijing are trying to arrange a late March meeting between Trump and Chinese President Xi Jinping in Florida.

However, after the U.S. markets also jumped on the news, investors began to cast doubts on whether the developments were significant enough to expect a new trade deal sooner than previously expected. Traders began to raise concerns over what the final trade agreement would look like. Questions were raised about whether the U.S. would keep current tariffs in place, gradually reduce them, or eliminate them all at once.

Political Pressure Mounting

Although President Trump seems to be optimistic about a trade deal being reached soon, saying “We’re getting very, very close,”, Democratic leaders are warning that China may be making false promises in hopes of bringing an end to the trade dispute that has been putting pressure on its economy.

According to the New York Times, “Some Republicans fear that Mr. Trump may settle for a deal that simply reduces the trade deficit between the two countries and potentially offers relief to a Chinese telecommunications giant, Huawei, which is facing criminal charges in the United States.”

Investor Reaction

Investors typically don’t like uncertainty and may use the concerns over the lack of details from the trade negotiations as an excuse to book profits and reduce exposure over the near-term. However, this won’t necessarily mean the trend is getting ready to turn down.