Chinese stocks had their best day in three and a half years on Monday in the wake of Donald Trump’s not unexpected decision to delay the deadline for trade talks with China from this Friday, March 1.
President Trump had given a big hint on Friday that an extension could be announced in the very near future and on Sunday he tweeted such a delay.
The president didn’t give a new deadline for the increase in tariffs on $US200 billion of Chinese imports and said the delay was because good progress was being made in the talks between the two countries.
The news ignited a strong day on Chinese markets – the CSI 300 index made up of Shanghai- and Shenzhen-listed major companies jumped 6% on Monday, its best one-day gain since September 2015.
The move also takes the index well into bull territory, having gained almost 27% since touching a January low.
And February is now set to post the best one-month performance since April 2015.
The 2019 surge in Chinese shares has been much bigger than elsewhere (Wal Street is up more than 11% by way of comparison and the ASX 200 is up 9.5%.
Chinese markets fell by between 24.6% and 34.4% in 2018 and the speed of the rebound this year in the midst of a wall of worry about the economy, the trade war and other issues has been eye-popping.
Once a deal is done on trade the question is if there will be any more strength left in the rally if the economy remains sluggish.
Elsewhere in the region on Monday, the Hang Seng index was up 0.5%, the ASX 200 rose 0.3% and the Nikkei in Tokyo added half a percent.
Meanwhile the onshore renminbi, which is permitted to trade 2% either side of a daily midpoint set by the People’s Bank of China was 0.3% stronger at Rmb6.6912 per dollar, the highest since July.
The offshore renminbi, meanwhile, was 0.1% stronger at Rmb6.6931.
The Australian dollar edged up to 71.50 US cents (its a proxy for the Chinese economy).
Thursday and Friday sees the release of the official and private surveys of Chinese manufacturing and services for February.
While the services sector is traveling OK, manufacturing activity has been in a contractionary phase for the last two months and analysts expect a small improvement, but that’s all.
