Asian markets rise on reports on US-China talks

A mural titled Bruce Lee at the junction of Square Street and Tank Lane, Sheung Wan. (Reuters pic)

HONG KONG: Hong Kong led a rally in Asian markets on Thursday following reports that the US had reached out to China in a fresh bid to avert a trade war, providing some much-needed respite to weary investors.

News that Treasury Secretary Steven Mnuchin had invited top Chinese officials for talks comes just under a week after Donald Trump threatened to impose tariffs on all US$500 billion (203 billion) worth of imports from China.

The president’s top economics adviser Larry Kudlow called the move a “positive thing” and added that “you could say that communication has picked up a notch”.

Investors welcomed the reports with Hong Kong soaring 1.9%, having fallen for six straight days and into a bear market, which is a 20% drop from its January record high.

Shanghai climbed 0.8%, Singapore added 0.3% and Seoul gained 0.1% while Tokyo ended the morning session 0.8% higher.

“Markets should welcome the news of possible resumption of high-level trade talks between China and the US,” said Tai Hui, JP Morgan Asset Management chief market strategist for Asia-Pacific.

“This may reflect strong feedback from the US corporate sector against further expansion of the list of Chinese exports that would be subjected to higher tariffs.”

However, while he warned the latest round of threatened tariffs could be delayed, he said Beijing had already agreed to buy more American goods to reduce its gaping surplus with the US and open up the economy further, so it might not be able to offer much more.

“The road to a more sustained resolution is still challenging,” Tai added.

The tariffs are clearly starting to bite US firms.

On Thursday, the American Chamber of Commerce in China said a survey found most companies are seeing rising costs, lower profits and tighter scrutiny.

That comes a day after the Federal Reserve reported increasing fears across the United States about the trade row, with some businesses planning to curtail capital spending, while a new lobby group announced plans to campaign against the levies in November’s elections.

The optimism also supported emerging-market and high-yielding currencies that have been battered by a flight to safe-havens such as the dollar and yen.

South Africa’s rand rose 1%, the Russian ruble gained 0.8% and the Australian dollar jumped 0.9%. The South Korean won put on 0.7% while the Indonesian rupiah gained 0.3%.

Energy firms also climbed with investors keeping tabs on Hurricane Florence as it surges towards the US east coast, with the Carolinas and Georgia in its crosshairs.

Concerns about the massive destruction the storm is likely to cause has helped send oil prices higher, while a forecast-beating draw in US stockpiles added to the increase.

While both main contracts dipped slightly Thursday, Japanese energy firm Inpex and Hong Kong-listed PetroChina soared 3%.