Asian Shares Boosted by Hopes of US-China ‘Mini-Deal’

U.S.-China trade talks are at the forefront, but investors are also monitoring the ongoing Brexit discussions and debating the degree of easing required from the Federal Reserve following the recent string of weakening U.S. activity indicators and the slowing in the labor market.
James Hyerczyk
Asian Stock Markets

The major Asia Pacific stock indexes are trading higher on Tuesday as investors welcomed China back into the mix after a week-long absence. Investors for the most part are downplaying reports that Chinese officials are growing hesitant to pursue a broad deal with the United States. While most are expecting a “no-deal”, J.P. Morgan analysts said “market investors also have high hopes for a mini-deal.”

At 06:58 GMT, Japan’s Nikkei 225 Index is at 21587.78, up 212.53 or +0.99%. Hong Kong’s Hang Seng Index is at 25992.55, up 171.62 or 0.66% and South Korea’s KOSPI Index is trading 2046.25, up 24.52 or +1.21%.

In China, the Shanghai Index is at 2915.53, up 10.34 or +0.36%. Australia’s S&P/ASX 200 Index settled at 6593.40, up 29.80 or +0.45%.

Samsung Electronics Announces Third-Quarter Guidance

Samsung Electronics said on Tuesday its operating profit for the three months that ended in September likely dropped by more than half from a year ago.

If the guidance is realized when the company reveals full results later this month, it will be the third consecutive quarter where Samsung’s operating profit has more than halved from the same period earlier. In the three months that ended June, Samsung said its operating profit fell 55.61% on-year.

Samsung has struggled in an environment where the price and demand for memory chips have been low for almost a year due to inventory adjustments and a supply glut.

Industry analyst are saying the industry-wide situation appears to be improving and there are signs of a broad-based recovery. Sanjeev Rana, a senior analyst at CLSA said, “We think 2020 will actually be a good year for Samsung’s earnings,” Rana said.

US-China Trade Talks Outlook

With trade talks between the two economic powerhouses set to begin on October 10, traders continue to focus on a number of scenarios that could arise from the meeting.

Analysts at J.P. Morgan said in a note they expect four possible scenarios could emerge from the trade negotiations.

First, an “ice-breaking meeting that will lead to a major deal” in the coming months; second, a “mini-deal” focusing on China’s purchase of U.S. products and some structural reforms while new tariffs get postponed indefinitely; third, a no-deal status quo where new tariffs come into play, but negotiations continue; and finally, a break-up scenario, where there’s no deal and no further dialogue between the U.S. and China.

J.P. Morgan analysts said they are expecting a no-deal status quo while “market investors also have high hopes for a mini-deal.”

Other Distractions for Investors

There is very little economic news this week which means investors have a lot of time to dwell on other areas. Of course, U.S.-China trade talks are at the forefront, but investors are also monitoring the ongoing Brexit discussions and debating the degree of easing required from the Federal Reserve following the recent string of weakening U.S. activity indicators and the slowing in the labor market.

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