SHANGHAI – Chinese and Hong Kong stocks closed up sharply on Monday and the yuan strengthened after Washington and Beijing announced a truce in their trade war.
The benchmark Shanghai Composite Index surged 2.57 percent, or 66.61 points, to 2,654.80, while the Shenzhen Composite Index, which tracks stocks on China's second exchange, rose 3.27 percent, or 43.81 points, to 1,381.55. Hong Kong's main index climbed 2.55 percent, or 675.29 points, to 27,182.04. The Chinese yuan strengthened by almost one percent to 6.8914.
US President Donald Trump and his Chinese counterpart Xi Jinping agreed in a meeting at the G20 on Saturday to suspend any new tariffs in the escalating trade war between the world's two largest economies, which has weighed on world markets.
Zhang Yanbing, an analyst with Zheshang Securities, said the trade outcome would likely spur a "medium to long-term" rally in China.
"The fresh sign of a trade truce gave relief to the industries most afflicted by the trade war, like telecommunications. Investors will be closely watching further developments on the Sino-US trade spat," Zhang added.
Shenzhen-listed telecoms giant ZTE Corp leapt 7.9 percent to 21.44 yuan, while Eastern Communications Corp closed the maximum 10 percent higher at 6.22 yuan in Shanghai.
In a research note, Wang Tao, head of China economic research at UBS AG in Hong Kong, also said the trade news will provide some near-term stability and improve sentiment.
But analysts have warned that tough negotiations still lie ahead before the core trade disputes are resolved. "We are not yet at that happy outcome as the latest agreement does not undo all of the harm already in place," Wang said.
"Increases in tariffs have large negative effects, while resolution does not undo the harm completely as economies have difficulty bouncing back from the structural changes induced by tariffs."
The White House said it would postpone for 90 days a planned January 1 increase in US tariffs on Chinese goods, while China pledged to take in more US imports.
Trump launched the bitter row earlier this year by implementing tariffs on billions of dollars worth of goods from China, which he accuses of throwing up market barriers and using predatory trade practices.
Beijing responded with reciprocal measures. Oil shares rose Monday, boosted by news that Russia and Saudi Arabia had renewed a pact to cap output ahead of a key meeting of OPEC at the weekend.
While there was no announcement on how much would be cut and for how long, the pact between the world's two biggest crude exporters was cheered by crude traders with both main contracts surging more than four percent. Sinopec gained 2.71 percent to 6.06 yuan and PetroChina added 1.58 percent to 7.73 yuan. The drug sector also rose despite Xi agreeing to Washington's calls to designate fentanyl as a controlled substance, as the US seeks to control its opioid epidemic.
Shanghai-listed Humanwell Healthcare gained 0.53 percent to 11.38 yuan and Shanghai Fuxing Medicine ended 7 percent higher at 29.79 yuan.
In Hong Kong energy giant CNOOC jumped 3.01 percent to HK$13.70, PetroChina rallied 3.83 percent to HK$5.70 and Sinopec jumped 3.91 percent to HK$6.91.
And casino operators, which have been beaten down this year, soared. Sands China rose 11.96 percent to HK$37.90, Wynn Macau was up 11.14 percent at HK$19.76 and Galaxy Entertainment jumped 9.89 percent to HK$52.80.
Market heavyweight Tencent was up 4.10 percent at HK$324.80 and AAC Technologies put on 4.42 percent to HK$57.90 while HSBC added 1.94 percent to HK$68.20. ---