The Hang Seng Index in Hong Kong continues its recent rally, rising 4% and approaching historic highs around 8,400-8,450. The Chinese stock market is not only reacting positively to any easing of the U.S. president’s protectionist policies, but also benefiting from gains in the technology, industrial, and retail sectors.
The Hang Seng China Enterprises Index (HSCEI), represented by the CNH.cash contract, has surged nearly 23% over the past month. Source: xStation5
Are Tariffs Less of a Threat?
China’s economic future seemed uncertain when Donald Trump campaigned on 60% tariffs for all imports from China. The HSCEI spent a few months 2024 in decline, fearing Trump's return to the White House. However, reports of amiable diplomatic relations between U.S. and Chinese leaders and a lack of concrete tariff announcements helped improve market sentiment in Hong Kong.
The new tariffs on China officially took effect on Monday, February 4, but the initial 60% threat was reduced to just 10%. Given Trump’s history of extreme trade policies, any concession is seen as a pro-market signal, reflected again in today’s HSCEI rally, as investors believe further tariff increases will be delayed until at least April.
Beyond AI: New Hope For Luxury
China’s market optimism is also supported by Hermès' strong earnings (RMS.FR: +2.4%), which help restore faith in the luxury sector after LVMH’s disappointing performance. The French fashion giant reported a 17.6% year-on-year increase in revenue, surpassing analysts' expectations by nearly €300 million. The best-performing segments were leather goods and saddlery, accounting for nearly half of Q4 2024 revenues.
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