Positive Tariff Talk Lifts Markets
6 Min. Read Time
Key News
Asian equities had a strong day following Treasury Secretary Bessent’s comments on getting a deal done with China and President Trump’s comments on not firing Fed Chair Powell and his willingness to do a deal with the Chinese government.
There is likely a significant delegation from China attending the International Monetary Fund (IMF) and World Bank meetings in Washington, DC, this week, though the attendees have not been announced.
Trump’s positive comments on tariffs and doing a deal followed his meetings yesterday with the CEOs of retail giants Walmart, Home Depot, and Target. The tariff tsunami is on the horizon, but has yet to come ashore!
Reuters reported that shipping company Hapag-Lloyd has experienced a -30% decline in its China-to-US shipments cancelled. Imagine a third less stuff at those stores! A Mainland media source noted that the rare earth export ban has impacted the production of Tesla’s robots and batteries. It shouldn’t be hard to see the relationship between markets and tariff talk. Less tariff talk equals markets up, while more tariff talk equals markets down, it would seem. Markets are forward-looking, though the real economic consequences on the US consumer and economy have yet to be felt, and it is not going to be pretty.
Following Trump’s comments, China’s Ministry of Foreign Affairs expressed a willingness to negotiate but reiterated a tough stance. There was chatter that a sell-side firm believes a tariff rollback could lead to a significant revaluation rally, though I’ve not seen the piece.
Hong Kong had a strong day on positive volumes as advancers outpaced decliners, led by growth stocks. Hong Kong’s most heavily traded stocks by value were Xiaomi, up +6.87%, Alibaba, up +5.45%, Tencent, up +3.00%, Meituan, up +2.84%, and BYD, up +3.89%. There were reports that China would stop the policy of allowing refunds prior to returning the goods due to complaints from merchants, which boosted internet company stocks. It seems logical!
China Mobile's stock fell by -2.23% following low growth financial results, which weighed on telecommunication stocks. Also, gold prices sank, which weighed on gold and precious metals stocks.
The massive flows into the Hong Kong Tracker ETF and Hang Seng China Enterprise ETFs yesterday were reversed today, as Mainland investors sold a net $2.3 billion worth of Hong Kong-listed ETFs and stocks today. Southbound Connect accounted for 49% of today’s Hong Kong turnover, indicating Mainland investors' reaction to the Trump comments was far less subdued and highlighting the real issue in China, which is real estate.
Like in Hong Kong, technology hardware and electronics stocks had a strong day, along with electric vehicle stocks, as CATL gained +1.15% and BYD gained +4.83%. The gains in electric vehicle stocks may be related to the Shanghai auto show kicking off. Otherwise, Mainland investors appear to be waiting for further stimulus policies, which could come at the end of the month's Politburo meeting. However, we might get a hint of what’s coming from the Standing Committee of the National People’s Congress, which runs from April 27th to 30th.
Are investors positioned for a positive outcome of the US-China trade negotiations? Definitely not! Despite the Hang Seng closing up +10% year-to-date (YTD) as of today's close, and the S&P 500 Index closing down -10% YTD as of yesterday's close, US-listed China equity ETFs have seen -$3 billion of outflows (to be fair, the vast majority of the outflow is concentrated in one ETF). Despite the European Manufacturing purchasing managers' indexes (PMIs), released this morning, showing contractions, US-listed European equity ETFs have seen $3.5 billion of inflows. Yes, European Union and Germany ETFs have had decent performance YTD. However, much of the positive performance can be attributed to the Euro's appreciation versus the US dollar. All I’m saying is that the pain trade in China is higher, not lower. The only people out there who have noticed the resilience of the Chinese equity market have been technical analysts. If the geopolitical headwind fades, game on.
Last Night's Performance
| Country/Index | Ticker | 1-Day Change |
|---|---|---|
| China (Hong Kong) | HSI Index | 2.4% |
| Hang Seng Tech | HSTECH Index | 3.1% |
| Hong Kong Turnover | HKTurn Index | 3.7% |
| Hong Kong Short Sale Turnover | HKSST Index | -24.7% |
| Short Turnover as a % of Hong Kong Turnover | N/A | 13.7% |
| Southbound Stock Connect Net Buy/Sell (US $ Millions) | N/A | 0 |
| China (Shanghai) | SHCOMP Index | -0.1% |
| China (Shenzhen) | SZCOMP Index | 0.8% |
| China (STAR Board) | Star50 Index | -0.4% |
| Mainland Turnover | .chturn Index | 12.8% |
| Nouthbound Stock Connect Net Buy/Sell (US $ Millions) | N/A | Not Available |
| Jing Daily China Global Luxury Index | CHINALUX Index | 0.8% |
| Japan | NKY Index | 1.9% |
| India | SENSEX Index | 0.7% |
| Indonesia | JCI Index | 1.5% |
| Malaysia | FBMKLCI Index | 1% |
| Pakistan | KSE100 Index | -1.1% |
| Philippines | PCOMP Index | 0.4% |
| South Korea | KOSPI Index | 1.6% |
| Taiwan | TWSE Index | 4.5% |
| Thailand | SET Index | 0.8% |
| Singapore | STI Index | 1% |
| Australia | AS51 Index | 1.3% |
| Vietnam | VNINDEX Index | 1.2% |
| Indicator | Hong Kong | Mainland China |
|---|---|---|
| Today's Volume % of 1-Year Average | 146% | 100% |
| Advancing Stocks | 370 | 3,009 |
| Declining Stocks | 111 | 1,965 |
| Outperforming Factors | Liquidity, Momentum, Large Cap, Growth | Liquidity, Momentum, Small Cap, Growth |
| Underperforming Factors | Value, Dividend Yield | Low Volatility, Value, Quality |
| Top Sectors | Tech, Discretionary, Communication | Discretionary, Tech, Industrials |
| Bottom Sectors | Real Estate, Materials | Real Estate, Communications, Materials |
| Top Subsectors | Tech Hardware, Consumer Services, Auto | Auto Parts, Motorcycle, Industrial Machinery |
| Bottom Subsectors | Telecom, Non Ferrous Metals | Precious Metals, Agricultural, Retail |
| Southbound Connect Buys | Meituan (moderate) | |
| Southbound Connect Sells | HK Tracker ETF and HS China Enterprise ETF (massive), China Mobile (large), Xiaomi (moderate), Alibaba, SMIC and Tencent (small) |
| MSCI China All Shares Index | # of Stocks | Average 1-Day Change (%) |
|---|---|---|
| Hong Kong Listed | 152 | 2.54 |
| Communication Services | 9 | 2.83 |
| Consumer Discretionary | 30 | 3.81 |
| Consumer Staples | 13 | 0.03 |
| Energy | 7 | 0.79 |
| Financials | 23 | 0.94 |
| Health Care | 13 | 1.75 |
| Industrials | 19 | 0.51 |
| Information Technology | 10 | 5.89 |
| Materials | 10 | -3.02 |
| Real Estate | 6 | -1.06 |
| Utilities | 12 | 0.21 |
| Mainland China Listed | 432 | 0.44 |
| Communication Services | 9 | -0.92 |
| Consumer Discretionary | 31 | 1.89 |
| Consumer Staples | 27 | 0.05 |
| Energy | 16 | 0.53 |
| Financials | 63 | 0.13 |
| Health Care | 40 | -0.17 |
| Industrials | 69 | 0.79 |
| Information Technology | 85 | 1.23 |
| Materials | 68 | -0.33 |
| Real Estate | 7 | -1.19 |
| Utilities | 17 | -0.17 |
| US & Hong Kong Dually Listed | Ticker | 1-Day Change (%) |
|---|---|---|
| Tencent HK | 700 HK Equity | 3 |
| Alibaba HK | 9988 HK Equity | 5.5 |
| JD.com HK | 9618 HK Equity | 1.5 |
| NetEase HK | 9999 HK Equity | 1.8 |
| Yum China HK | 9987 HK Equity | 10.3 |
| Baozun HK | 9991 HK Equity | 1 |
| Baidu HK | 9888 HK Equity | 3 |
| Autohome HK | 2518 HK Equity | -1.8 |
| Bilibili HK | 9626 HK Equity | 3.2 |
| Trip.com HK | 9961 HK Equity | 2.9 |
| EDU HK | 9901 HK Equity | 3.1 |
| Xpeng HK | 9868 HK Equity | 8.7 |
| Weibo HK | 9898 HK Equity | 1.8 |
| Li Auto HK | 2015 HK Equity | 0.6 |
| Nio Auto HK | 9866 HK Equity | 4.4 |
| Zhihu HK | 2390 HK Equity | 4.6 |
| KE HK | 2423 HK Equity | 5.9 |
| Tencent Music Entertainment HK | 1698 HK Equity | 5.6 |
| Meituan HK | 3690 HK Equity | 2.8 |
| Hong Kong's Most Heavily Traded by Value | 1-Day Change (%) |
|---|---|
| XIAOMI CORP-CLASS B | 6.9 |
| ALIBABA GROUP HOLDING LTD | 5.5 |
| TENCENT HOLDINGS LTD | 3 |
| MEITUAN-CLASS B | 2.8 |
| BYD CO LTD-H | 3.9 |
| SEMICONDUCTOR MANUFACTURING | 0.4 |
| POP MART INTERNATIONAL GROUP | 1.5 |
| JD.COM INC-CLASS A | 1.5 |
| CHINA MOBILE LTD | -2.2 |
| HONG KONG EXCHANGES & CLEAR | 2.1 |
| Shanghai and Shenzhen's Most Heavily Traded by Value | 1-Day Change (%) |
|---|---|
| BYD CO LTD -A | 4.8 |
| EOPTOLINK TECHNOLOGY INC L-A | 12.5 |
| LAKALA PAYMENT CO LTD-A | 8.3 |
| LUXSHARE PRECISION INDUSTR-A | 4.1 |
| CNPC CAPITAL CO LTD-A | -1 |
| ZIJIN MINING GROUP CO LTD-A | -3.8 |
| VICTORY GIANT TECHNOLOGY -A | 0 |
| CHIFENG JILONG GOLD MINING-A | -10 |
| ZHONGJI INNOLIGHT CO LTD-A | 4.3 |
| EAST MONEY INFORMATION CO-A | 0.3 |
Last Night's Exchange Rates, Prices, & Yields
- CNY per USD 7.28 versus 7.31 yesterday
- CNY per EUR 8.31 versus 8.40 yesterday
- Yield on 10-Year Government Bond 1.66% versus 1.65% yesterday
- Yield on 10-Year China Development Bank Bond 1.70% versus 1.68% yesterday
- Copper Price +1.05%
- Steel Price +0.55%
