Hong Kong stocks ended trading on Wednesday with a touch of cautious optimism among investors following the signing of the long-awaited, phase-one economic and trade deal between China and the United States.
The benchmark Hang Seng Index opened 32 points higher and surged more than 200 points during the morning session. However, it started to fluctuate between small gains and losses after midday, with the index managing to eke out just a 109 point, or 0.38 percent, gain at 28,883.04 at the close.
The Hang Seng China Enterprises (H-share) Index rose 32.91 points, or 0.29 percent, to 11,328.38. Market turnover reached HK$101.5 billion on the main board, marking the fifth consecutive day it had exceeded the HK$100 billion mark.
The signing has reduced the downside risks of renewed escalation in the dispute that has weighed on the global economy for almost two years
Michael Taylor, managing director of credit strategy and standards at Moody's Investors Service
The initial trade pact was signed at the White House on Thursday morning Beijing time by US President Donald Trump and Chinese Vice-Premier Liu He.
The signing has reduced the downside risks of renewed escalation in the dispute that has weighed on the global economy for almost two years, said Michael Taylor, managing director of credit strategy and standards at Moody's Investors Service.
He believes the agreement could help boost bilateral exports by the world’s two largest economies and lead to improved business confidence, as well as investment.
The deal covers intellectual property, technology transfers, agriculture, financial services, currency, expanding trade, and dispute resolution.
“There were few surprises in the deal itself as dealmakers have been touting progress in these areas in recent weeks, and investors finally have a final text to see for themselves,” said Hannah Anderson, global markets strategist at JP Morgan Asset Management.
She said that, given the amount of market speculation and comments by officials ahead of the signing, it’s not surprising to see markets not rallying too strongly in response to the deal.
Both Asian and US investors largely seem to have accepted the pause in escalation and gotten back to focusing on other issues, Anderson said.
“Fundamentally, this deal does little to alter either the US or Chinese economies,” she said, noting that tariffs remain extremely high and the key issues in the Sino-US economic relationship remain unaddressed.
Anderson expects markets to continue pricing in an elevated risk premium, which could be a source of volatility throughout 2020. Developments in trade, particularly US-China trade, are likely to be a constant feature this year.
