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A key gauge of Hong Kong-listed Chinese shares gained as much as 4.6% in early Thursday trading, while the onshore benchmark CSI 300 Index added 1.9%.
The gains came even as Donald Trump raised tariffs on China further to 125% while announcing a 90-day pause on higher levies for most other nations. The US President’s prediction afterward that Beijing would come to the table for talks rekindled investor hopes for less confrontation going forward, aiding sentiment already lifted by speculation of fresh pro-growth measures by Chinese authorities.
“Investors will be on the lookout for fiscal stimulus and further signs of government support in key industries, especially the tech sector,” said Gary Tan, a portfolio manager at Allspring Global Investments. “The Trump administration also indicated that there is limited room for tariffs on China to increase further.”
Apart from the lingering hope of an eventual trade deal with the US, a key driver that has been underpinning Chinese equities in recent days is expectations for policymakers to introduce more potent stimulus measures to lift the economy out of a slump.
The sense of urgency increased further Thursday, with data showing consumer deflation extended for a second month in March in the world’s No. 2 economy. Meanwhile, the onshore yuan fell to its weakest level against the dollar since the global financial crisis.
Earlier in the week, Chinese authorities pledged to ‘fight to the end’ in response to Trump’s tariffs, with state-backed funds stepping in to support the market. That’s helped spur a rebound since Monday’s historic selloff.
Despite the three-day rally in Chinese equities, some observers remain cautious.
It’s “too early to bottom fish” in Chinese stocks given near-term downside risks, including worsening US-China tensions and a potentially slower global economy, UBS strategists including James Wang wrote in a note dated April 10.
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