Trump’s tariffs haven’t scared investors away from Chinese stocks just yet

Chinese stocks shake off Trump tariffs, riding the DeepSeek hype: Chinese stocks are holding their ground despite the latest round of US tariffs as optimism over China’s AI sector and expectations of policy support offset the building US-China trade war, Reuters reports. The rally in AI stocks — driven by excitement around Chinese startup DeepSeek’s new low-cost AI model DeepSeek V3 — is fueling investor confidence even as markets continue to digest US President Donald Trump’s 10% tariffs on USD 450 bn worth of Chinese goods.

Markets are shrugging off trade tensions — at least for now: Trump’s latest trade move, while a clear escalation, was not as aggressive as markets had anticipated. Investors had largely priced in the 10% tariffs, with a stock market rally in Hong Kong this week offering some initial proof. “China’s market will likely overlook the tariff disruptions, as DeepSeek is repairing risk appetite, while investors look forward to more proactive domestic policies,” Kaiyuan Securities Analyst Wei Jixing told Reuters. The expectations that Beijing will roll out fresh stimulus measures, combined with bullish sentiment in AI and electric vehicles, has helped keep market nerves in check.

A mixed bag across stock indices: Aside from some profit-taking, overall declines following Trump’s tariffs were limited. The CSI 300 and Shanghai Composite both dipped around 0.6%, while Hong Kong’s Hang Seng Index lost 0.9% after a strong run. Tech-heavy Chinese stocks listed in Hong Kong climbed more than 4% this week, hitting a three-month high, with the sector’s biggest players rallying nearly 7%. Meanwhile, AI stocks in mainland China surged 3% as investors caught up to Hong Kong’s earlier gains.

PBOC holds firm in currency policy: The People’s Bank of China (PBOC) set the CNY’s daily reference rate at CNY 7.17 against the greenback, its strongest level since November, signaling that Beijing is not rushing to weaken the currency in response to Trump’s tariffs. This contrasts with its response to tariffs slapped on the country during Trump’s first term, when China let the currency slide to offset the impact of tariffs and improve the competitiveness of its exports.

Investors are staying cautious, but no panic yet: With policymakers bracing for prolonged tensions, there’s hope that Trump’s softer-than-expected tariffs and his upcoming talks with Chinese counterpart Xi Jinping could provide room for negotiations. “On the whole, having a trade war is not what the market wants. But investors are less likely to panic this time,” abrdn’s Investment Director Elizabeth Kwik told the newswire.

Investors are also watching closely for any future moves by China’s central bank, as further depreciation could indicate Beijing expects prolonged tensions with Trump and is preparing for a drawn-out trade war.

The news also got ink from Bloomberg.

MARKETS THIS MORNING-

Asian markets are mostly in the green in early trading this morning, with Japan’s Nikkei up 0.2%, Shanghai Composite up 0.2%, and South Korea’s Kospi up 0.6%.

THE CLOSING BELL: TADAWUL-

The TASI fell 0.2% yesterday on turnover of SAR 7 bn. The index is up 3.1% YTD.

In the green: Sharqiyah Dev (+6.7%), Zamil Indust (+4.6%) and Americana (+4.4%).

In the red: Kingdom (-3.0%), Tawuniya (-2.3%) and Sabic Agri-Nutrients (-2.3%).

THE CLOSING BELL: NOMU-

The NomuC rose 0.2% yesterday on turnover of SAR 41.6 mn. The index is down 0.7% YTD.

In the green: Itmam (+9.8%), Aldawliah (+8.8%) and Food Gate (+7.9%).

In the red: Aqaseem (-8.9%), Alrazi (-5.8%) and Sama Water (-5.3%)

CORPORATE ACTIONS-

#1- SAB recommends SAR 2.05 bn in dividends for 2H 2024: Saudi Awwal Bank’s (SAB) board recommended distributing SAR 2.05 bn in dividends payout for 2H 2024, at SAR 1 per share after Zakat, according to a disclosure to Tadawul. Distribution will be announced at a later date.

#2- Dallah Healthcare lined up the Capital Market Authority’s approval to increase its capital to SAR 1.02 bn, up from SAR 976.8 mn, through a 3.9 mn rights issue, the authority said in a statement. The newly issued shares will go to Ayyan Investment in exchange for 100% of Ayyan’s Al Salam Medical and a 97.4% stake in Al Ahsa Medical.

Background: Dallah Healthcare inked a binding SAR 660 mn share purchase and subscription agreement in August with Ayyan Investment to acquire Ayyan’s 97.4% stake in Al Ahsa, valued at SAR 409 mn, and 100% of Ayyan’s Al Salam Medical, valued at SAR 251 mn, by way of issuing new shares to Ayyan.