Hong Kong stocks buoyed by trade war truce, though deal uncertainty, economic worries curb gains

• The Hang Seng index rose 0.8pc, to 26,521.85, while the China Enterprises Index gained 0.5pc, to 10,507.85 points.
• Investors now wait for a slew of economic data this week, including GDP growth.

HONG KONG: Hong Kong stocks rose on Monday on signs of progress in Sino-U.S. trade talks, but the gains were capped by doubts over the durability of a partial preliminary deal, and lingering worries about China's economy.

The Hang Seng index rose 0.8pc, to 26,521.85, while the China Enterprises Index gained 0.5pc, to 10,507.85 points.

Investors welcomed signs of an improvement in trade relations between Washington and Beijing after U.S. President Donald Trump on Friday outlined the first phase of a deal to end the trade war with China and suspended a threatened tariff hike due to take effect on Tuesday.

The emerging deal, covering agriculture, currency and some aspects of intellectual property protections, would represent the biggest step by the two countries in 15 months to end the tit-for-tat tariff war, though Trump said it could take up to five weeks to get a pact written.

Nomura strategist Ting Lu said that the near-term agreement did little to suggest that the two sides had bridged fundamental differences on trade, China's structural policies and national security that have been growing challenges in recent years.

"We still see high uncertainty in officially reaching the 'phase one' deal," Lu wrote in note, adding: "We expect China's growth to slow at a faster pace in coming months despite the truce between US and China."

China's exports fell at a faster pace in September, while imports contracted for a fifth straight month, pointing to further weakness in the economy and underlining the need for more stimulus as the Sino-U.S. trade war drags on.

Investors now wait for a slew of economic data this week, including GDP growth, inflation and industrial output for further clues about the Chinese economy.

J.P. Morgan Asset Management's chief market strategist Asia, Tai Hui, said that, although the tentative trade deal "should support risk appetite in the near-term, be positive for equities and tighten corporate credit spreads ... market optimism may not be well supported by economic reality."