Is a Turning Point on the Horizon for US-China Relations? Chinese Asset Sentiment Shows Signs of Recovery
On the evening of January 17, Chinese President Xi Jinping spoke with President-elect Donald Trump. President Xi congratulated Trump on his election victory, underscoring the significance of mutual engagement and expressing hopes for a positive beginning in US-China relations during the new presidential term. Both leaders expressed a commitment to advancing US-China relations from this promising starting point.
Fueled by the optimistic sentiment stemming from the phone call between the two leaders, Chinese concept stocks experienced a notable surge last Friday, with the $NASDAQ Golden Dragon China Index(HXC)$
Various turning points are emerging in US-China relations
The Chinese Vice President has been invited to attend Trump's inauguration ceremony, a rare high-profile event that underscores the significance of the relationship between China and the United States. Italy's Prime Minister and Argentina's President have also confirmed their attendance. Meanwhile, Japan, India, and Australia will send their foreign ministers, while other nations will be represented by their ambassadors to the US.
Additionally, Trump expressed his intention to visit China within the first 100 days of his administration, which would be before the end of April.
Trump Advocates for TikTok'sReturn. US President-elect Trump announced on social media that he plans to issue an executive order on January 20 to extend the deadline for the TikTok ban before it becomes legally effective. TikTok has witnessed a resurgence of American users, marking the end of a 14-hour shutdown triggered by the nationwide ban.
Several foreign investment institutions have raised their outlook on the Chinese market
For example, Lu Wenjie, the investment strategist for BlackRock in Greater China, indicated in a recent research report that BlackRock maintains a tactical "overweight" view on Chinese stocks. Similarly, Nie Yixiang, Co-Chief Investment Officer of Fidelity Fund Management (China) Limited, anticipates that by 2025, overseas funds will begin to flow back into the Chinese market, increasing allocations to core Chinese assets.Many foreign investment institutions share an optimistic perspective on the future performance of the Chinese market. They believe that the recovery of corporate profits will support a market uptrend, with incremental funds expected to continue flowing in.
Chinese asset sentiment begins to recover
After the phone call between Trump and Xi Jinping, Wall Street traders aggressively bought call options on ETFs linked to Chinese stock indices on Friday. $iShares China Large-Cap ETF(FXI)$
According to media reports, Chris Murphy, Co-Head of Derivatives Strategy at Susquehanna International Group, stated that investors purchased a large number of FXI call options expiring over the weekend, buying 4 million shares corresponding to the option contracts at strike prices as high as $31-32. Additionally, there was increased demand for FXI call options expiring in February, and the demand for KWEB call options also rose.
Chinese concept stocks are exhibiting strong performance
Among the most popular Chinese concept stocks, $JD.com(JD)$
While the current valuations of Chinese concept stocks are appealing, their future performance will largely hinge on the stimulus measures enacted by the Chinese government and the potential for a stronger-than-expected economic recovery.
Furthermore, investors should remain aware that the trajectory of US-China relations is uncertain. It will be essential to observe how the new administration approaches tariffs and technology sanctions affecting China.
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