Chinese Indexes Jump as Hope of US-China Truce Rises

Trade War on a break?

Today, the South China Morning Post reported that the US and China have agreed to a tentative truce to the trade war and are working on statements in this regard. The truce would delay tariffs on an additional $300 billion worth of Chinese goods entering the US. The report added that Chinese Premier Xi Jinping’s decision to meet Trump at the G20 meeting, which starts tomorrow, led to Trump’s decision to delay the additional tariffs.

As for Trump himself, he reiterated yesterday that he was ready to impose additional tariffs if no agreement is reached between the two countries. The same day, Treasury Secretary Steven Mnuchin said that the deal was 90% done. J.P. Morgan’s Jamie Dimon doesn’t expect a quick resolution to the trade war.

Chinese Indexes and ETFs

The report of a truce helped Chinese indexes recover from yesterday’s marginal losses. The key Shanghai Composite gained 0.69% today while the Shenzhen Component gained 1.3%. The iShares China Large-Cap ETF (FXI), which gained 1.2% yesterday, was up 0.78% in pre-market today trading today at 4:47 AM ET due to the news of the truce. The KraneShares CSI China Internet ETF (KWEB) was the biggest winner among the major China-focused ETFs yesterday with a 2.5% gain. Alibaba (BABA), which is a part of the ETF and derives the majority of its revenues from China, gained 1.92% yesterday and was up 1.2% in pre-market trading today at 4:47 AM ET.