Chinese companies (ADRs) are among the best-performing stocks on the U.S. market today, while futures on China’s HSCEI Index (CHN.cash) are up more than 2.6%, matching local highs from July. Despite mixed macroeconomic data from China and the absence of a “satisfactory” stimulus program to boost domestic demand, Chinese equities have become a “magnet” for foreign capital seeking exposure outside the U.S. Higher U.S. tariffs, which were set to take effect this week, have been postponed for another 90 days.
- The reasons for this performance may include relatively attractive valuations, a shift in capital policy toward being more supportive of “building market value” in companies, government backing for the stock market (posing a “challenge” to Western markets), and a decline in geopolitical risk.
- Both China and the U.S. are trying to remain on a diplomatic path despite “frictions,” which has also reduced the risk of a potential delisting of Chinese companies from U.S. exchanges, as both nations express a willingness to benefit from mutual “capitalist” access to free markets (albeit with certain, sometimes significant, restrictions).
- The U.S. has allowed China access to older AI chip architectures from Nvidia and AMD, which potentially signals that some strategic-level frictions are gradually being balanced out. On the other hand, the U.S. may have concluded that China already possesses similar technology (Huawei), eliminating the strategic interest in blocking sales to domestic companies.
Recently, Washington has also toned down its comments regarding Taiwan, while Trump declined to meet with the island’s president, seeking to avoid escalating tensions with Beijing. It appears that China’s main growth driver will be a gradually increasing credit impulse, with further central-level support programs potentially still to come. Also, weakening US dollar and rising sentiments on Wall Street support demand on emerging markets, where Chinese stocks weigh a lot.
Source: xStation5
Alibaba (BABA.US) shares are up more than 3%, approaching record levels and breaking upward from a triangle pattern, potentially paving the way for a test of the $140 area in the medium term.
Source: xStation5
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