Asian Shares Boosted by Trade Talk Optimism

“Big day of negotiations with China. They want to make a deal, but do I? I meet with the Vice Premier tomorrow at The White House,” Trump said in a tweet Thursday.
James Hyerczyk
Asian Shares

The major Asia Pacific stock indexes closed higher on Friday as investors remained optimistic that U.S.-China trade negotiations would end with a positive outcome. The strength was attributed to a tweet by U.S. President Donald Trump that said he is set to meet with Chinese Vice Premier Liu He on Friday.

On Friday, in Japan, the Nikkei 225 Index settled at 21798.87, up 246.89 or +1.15. In Hong Kong, the Hang Seng Index finished at 26308.44, up 600.51 or +2.34% and in South Korea, the KOSPI Index closed at 2044.61, up 16.46 or +0.81%.

Australia’s S&P/ASX 200 settled at 6606.80, up 59.70 or +0.91% and China’s Shanghai Index finished at 2973.66, up 25.95 or +0.88%.

Investors Betting on Positive Trade Developments

Shortly after the U.S. cash market opening on Thursday, President Donald Trump said he’s meeting with Chinese Vice Premier Liu He on Friday, fueling optimism about a positive outcome from this week’s high-level trade talks.

“Big day of negotiations with China. They want to make a deal, but do I? I meet with the Vice Premier tomorrow at The White House,” Trump said in a tweet Thursday.

Trump’s comment about a meeting with Liu contrasted with a report from the South China Morning Post that said the two sides made no progress in deputy-level trade talks this week and Liu will cut his visit short.

You know the drill, investors bought stocks on the news, driving the indexes sharply higher in the U.S., in a move that carried over to the Asian session.

China Carries “Great Sincerity”

Before the markets opened on Thursday, Liu told Chinese state-run media agency Xinhua that China carries “great sincerity” to the talks this week.

“The Chinese side has come with great sincerity and is willing to make serious exchanges with the U.S. on issues of common concern such as trade balance, market access and investor protection, and promote positive progress in the consultations,” Liu said.

Possible Outcomes

“To affirm a temporary trade truce, the second day of trade talks (Friday) will need U.S. President Trump to suspend or cancel the U.S. tariffs that are scheduled to hit on Chinese goods October 15 and December 15,” strategists at Singapore’s DBS Group Research wrote in a note.

Still, in the longer term, the strategists said: “The broader China-US trade war remains unresolved,”

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.”

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