HONG KONG: Chinese shares pulled back from a decade high on Thursday as US President Donald Trump and Chinese President Xi Jinping concluded a high-stakes meeting in South Korea with a trade-war truce that investors had broadly expected.
Investors appeared heartened by signs of cooling tensions between the world’s top two economies after recent escalations, while also positioning defensively with a sense of deja vu that the real deal may offer far less to celebrate.
Previous trade negotiations have seen promising starts followed by setbacks.
After a near two-hour meeting with Xi, Trump said he had struck a deal to trim tariffs on China in exchange for Beijing resuming US soybean purchases, keeping rare earths exports flowing and cracking down on the illicit trade of fentanyl.
The market reaction was choppy with traders trying to make sense of the information released so far. China’s yuan retreated from a near one-year high against the dollar after the meeting.
China’s commerce ministry confirmed that the country and the US have agreed to extend their temporary trade truce for another year as part of an agreement they reached after top economic officials met in Malaysia last week.
The benchmark Shanghai Composite Index hit its highest level since 2015 at the start of the session but closed down 0.73 percent, inching away from the 10-year high it has been around this week. Hong Kong’s Hang Seng Index fell 0.2 percent.
China’s CSI Rare Earth Industry Index rose more than 2 percent, while defensive plays such as liquor and banking pared earlier gains. The AI sector index was down nearly 2 percent.
The stakes are particularly high given the breadth of this year’s rally across Chinese markets.
Despite rollercoaster trade headlines, the Shanghai benchmark has surged nearly 20 percent this year, overturning the “uninvestable” narrative that had dominated global investor sentiment toward Chinese markets in recent years.
Hong Kong’s Hang Seng has climbed over 30 percent, ranking it among the best performing markets globally.
“Managing to meet and de-escalate after recent tensions will help remove a major uncertainty, lowering the immediate risks to end the year,” said Lynn Song, chief economist for Greater China at ING.
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