SHANGHAI: China stocks closed at their highest point in over 10 years on Monday, driven by hopes for a US-China trade deal after top officials on both sides outlined a framework agreement ahead of a key leaders’ meeting later this week.
The benchmark Shanghai Composite Index ended 1.2 percent higher, slightly shy of the psychologically key 4,000 mark, while the blue-chip CSI300 Index was up 1.2 percent. Hong Kong’s benchmark Hang Seng Index gained 1.1 percent.
Top Chinese and US economic officials on Sunday hashed out the framework of a trade deal for US President Donald Trump and Chinese President Xi Jinping to review later this week. It would pause steeper American tariffs and Chinese rare-earth export controls, US officials said on Sunday.
“Investors have been sitting on the sidelines watching trade talks for a while, and the weekend developments were a pretty positive surprise. It will give markets a boost,” said Kenny Ng, a securities strategist at Everbright Securities International.
Ng said market participants still need to determine if the final terms of the deal mirror what was outlined over the weekend or contain unexpected elements.
Trump and Xi are due to meet on Thursday on the sidelines of the Asia-Pacific Economic Cooperation summit in Gyeongju, South Korea, to sign off.
Artificial intelligence shares led gains onshore, up 2.4 percent, while tech firms in Hong Kong were up 1.8 percent.
China’s yuan jumped to a more than one-month high against the US dollar on Monday and government bond futures also ended higher.
Still, market participants remained cautious about how long the current thaw in tensions might last.
“Both sides are still reliant on one another, and both are buying time to reduce this reliance,” said Ting Lu, chief China economist at Nomura. “We view this cycle of tension, escalation and truce as the new normal for US-China relations.”
“We are not surprised to see the truce again, and we won’t be surprised to see another escalation in the next couple of months,” Lu said.
Trading sentiment was also helped by a report on Chinese industrial profits, which grew at their fastest pace in nearly two years in September. That marked a second straight month of gains, signalling that measures designed to curb overcapacity and rebalance the economy could be gaining traction.
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