Hong Kong stocks recovered on Wednesday as fear of escalating trade dispute between the US and China subsided.
US President Donald Trump softened his rhetoric saying that he expects to meet with his Chinese counterpart Xi Jinping at the G20 Summit in Japan next month. Although Beijing said that both sides were willing to talk, it has not confirmed the meeting of the two leaders.
But Trump’s softening stance was sufficient to calm the nerves of investors shaken by his combative tweets last week. Global markets rebounded on Tuesday and stock commentators changed their tones dismissing the notion of a protracted trade war between the world’s two largest economies.
Instead of urging investors to stay on the sideline, analysts are making recommendations of stocks to buy. The bargains, they said, are the stocks that have been hit hard in the past several days by investors concern about the trade dispute. The obvious ones include the likes of Apple and Boeing in the US.
In Hong Kong, these so-called bargains are easy to pick. They cover nearly all the H shares of major mainland enterprises in finance, trade and technology which took a severe beating earlier this week.
But so far not that many investors feel confident enough to make the switch. The recovery in early trade on Wednesday remained subdued with the benchmark index rising about 150 points to just above 28,000.
Indeed, the trade dispute is far from being resolved. The US has put in place the increased tariffs on US$200 billion of Chinese imports and China has retaliated by slapping higher tariffs on $60 billion of US goods.
Trump threatened earlier that he would tax additional Chinese imports if further talks fail to produce an agreement in one month. Although he later said that he hasn’t made a decision yet on additional tariffs, his threat is a reminder that the trade talks can sour, leading to another round of escalation.
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