Hong Kong and Asian share gains are an unexpected phenomenon, as predictions leaned towards a slowing down of the Chinese economy and markets due to the Trump tariffs.
Hong Kong shares reached a three-year high, pulling up the Asian market on Tuesday. Given the rising global tensions and the renewed tariff wars, this improvement is a breath of fresh air for investors as it throws a positive shade on the world’s second-largest economy. The recently published data has been met with much enthusiasm, indicating a further expansion in consumption.
Reuters reported that the Hang Seng value witnessed a 2% increase in morning trade and its 23% year-to-date gain is the largest of any major market. The New Zealand dollar value gained as a result of short sellers hurriedly covering their bets, reaching a three-month high of $0.5827. This was influenced by Chinese reliance on New Zealand for food exports.
China’s yuan also gained, increasing the China-sensitive Australian dollar to about $0.64 after a month-long slump. These gains are an unexpected phenomenon, as predictions leaned towards a slowing down of the Chinese economy and markets due to the Trump tariffs. On the other hand, according to the Organization for Economic Cooperation and Development (OECD), these tariffs will push up inflation while dragging down the growth rate in the US, Mexico and Canada. The OECD has estimated the price US households will have to pay due to the import taxes, will be much higher than the extra income these tariffs are expected to generate.
The Hong Kong dollar is trading strongly against the US dollar and the Hong Kong interbank rates have been declining as the flow of financial capital has increased. Since Trump took to the White House, the Hang Seng Index, where major Chinese companies are listed has witnessed a 17% rise. According to market experts, this surprising performance of Chinese and other Asian stocks is because investors who were initially weary of the global market due to the impending trade war have gone from thinking of it as TINA (There Is No Alternative) to believing in TIARA (There Is A Real Alternative).
China’s gains have been attributed primarily to technology shares which have recorded a 29% increase since the beginning of this year, hitting an all-time high in the past three years. The reason the market has defied all expectations and is outperforming is because Chinese stocks are cheap, and investors witnessed the bloating of tech stock following the boom of DeepSeek AI.
The renewed interest in Chinese stock has cost the US market dearly. Retail and factory activity was lower than expected, which caused the dollar to plummet in value. U.S. benchmark S&P 500 index shrank more than 10% in mid-February. President Trump, however, is determined to double down on these tariffs and reduce government spending.
World leaders are concerned with the impact of this trade war and are using all available diplomatic channels to reason with the POTUS. According to Trump, Chinese Premier Xi Jinping will soon visit Washington, and the two countries could potentially sign a deal to reduce tariffs on both sides.
However, Beijing is not standing by, waiting to see what the consequences of these tariffs will be. Stimulus packages have already been rolled out, and in a February meeting with Xi and prominent business leaders, investors foresaw potential expansion and growth. As per a Reuters report, Morgan Stanley found data which indicated an investment of $3.8 billion in Chinese equities by foreign funds.
China’s performance has also lifted the rest of Asia out of its downtrend. Asia-Pacific stocks gained 1% along with markets in Seoul, Sydney and Taipei, while Japan’s Nikkei rose 1.5%. Jakarta shares were the only outliers, pummeling by 7%, their lowest in three-and-a-half years.
There are several major political and economic changes occurring simultaneously around the world, and markets are reacting very sensitively to these situations. While Asian markets are gaining now, there is no certainty this upward trend will remain the norm. Therefore, investors could be working to minimize their losses and capitalise on such increments before market troughs are reported.
