Chinese equities and the yuan rise as investors look beyond rising US tariffs

SHANGHAI / HONG KONG (Reuters) – Chinese stocks and the yuan strengthened on Friday after the United States imposed higher tariffs on Chinese goods imports worth $ 200 billion. hope.

The US President Donald Trump's 25% tariff increase on Chinese goods worth $ 200 billion came into effect on Friday at the noon break for the Chinese stock market. The Chinese Ministry of Commerce said it "deeply regretted" the US decision, adding that it would take the necessary countermeasures, without further details.

But after speaking for 90 minutes Thursday in Washington, Chinese Vice Premier Liu He, US Trade Representative Robert Lighthizer, and US Treasury Secretary Steven Mnuchin were scheduled to resume negotiations on Friday.

The Chinese Composite Shanghai Composite Index and the CSI300 Prime Index briefly tipped into the red as trading resumed for the afternoon, but they quickly reversed their course.

The Shanghai Composite was up 2% and the CSI300 2.4%.

"All the negative news is out there and the uncertainty is eliminated," said Zhang Yanbin, an analyst at Zheshang Securities. He added that the sharp declines in Chinese stocks in recent days limited the possibility of further sharp declines.

The Shanghai Composite and the CSI300 ended Thursday at their lowest level in 11 weeks.

"The future is bright because Deputy Prime Minister Liu He's comments in Washington could indicate a relatively large chance of reaching an agreement," said Zhu Junchun, an analyst at Lianxun Securities.

"The recent failure of the negotiations could result from tactics but will not affect their direction or their results," he said.

In Hong Kong, the Hang Seng index rose 0.8%, while H shares rose 1%.

The smallest index in Shenzhen was up 2.4% and the new ChiNext Composite was up 3%.

"Market sentiment has improved following the progress of the latest Sino-US trade round, resulting in a rebound after recent falls," said Zhou Liang, founder of Shanghai Minority Investment Management. "Although facing a growing trade war, the market has been much stronger this year than last year, reflecting the increased confidence of Chinese investors."

The Chinese yuan was 0.30% stronger at 6.8071 per dollar, although the Chinese central bank has set the lowest point in the currency's daily trading band to its lowest level in 3½ months. before the opening of the market, at 6.7912 per dollar.

The silver bullet came after a spot market sell-off on Thursday's tariff war, though traders are expecting an even bigger drop.

The offshore yuan grew stronger at the start of trading, but then gave up most of its gains. It was finally a little stronger, trading at 6.8375 for a dollar. It had fallen to 6.8636 for a dollar on Thursday.

Zhou Hao, Commerzbank's EM economist in Singapore, said yuan increases were largely driven by changes in sentiment in the market.

"Trump is very versatile. And investor sentiment has gone from excessive optimism to an excess of pessimism, "he said.

Zhou said investors now have the feeling that "as long as trade negotiations continue, it is a good thing".

Zhou said that he did not think the rebound would be sustainable and that he expects the yuan to trade in a range of 6.75 to 6.9 per dollar.

The Chinese government's bond futures were unchanged, with 10-year cash futures for delivery in June, the most traded, trading up 0.04% to 97.030.