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(Bloomberg) -- Chinese shares rose for a fourth day as expectations for stronger stimulus and hopes of an eventual deal outweighed concerns over a further escalation of trade tensions.
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A key gauge of Hong Kong-listed Chinese stocks ended Friday 1.7% higher, while the onshore CSI 300 Index added 0.4%. Both outperformed a broader Asian market gauge.
The gains followed the White House’s clarification Thursday that after including a 20% levy imposed earlier this year, the total tariffs on China reached 145%, a level far above what many economists said could decimate US-China trade. Around the time Hong Kong’s market closed, China announced it will further hike its own levies on the US to 125% from 84%.
The extended rally signals continued bets for Beijing to roll out fresh growth support as investors await the outcome of a Thursday meeting planned by China’s top leaders to discuss additional stimulus. Hope is also alive for the world’s two largest economies to reach a compromise after Trump indicated willingness to be “flexible” on exemptions for companies or countries from the tariff regime.
Stocks were rising on the potential easing in US-China tensions after Trump indicated the willingness to “exempt thousands of products from tariffs,” said Steven Leung, an executive director at UOB Kay Hian Hong Kong. “Investors are also expecting some supportive measures in China after top officials’ recent meetings.”
Trump said Thursday he thought the first trade deals are “very close” and voiced optimism that China would eventually come to the table.
Beijing’s latest retaliatory tariff increase came after Trump imposed on Thursday a 125% charge on Chinese goods, which was on top of a 20% levy put into place earlier this year over China’s role in fentanyl trafficking. On Wednesday, Beijing said it will impose an 84% levy on US imports, following Washington’s move to raise the tariffs on China to 104%.
China also said on Friday that it plans to ignore any further increases announced by the US from here because the Trump administration’s moves have become “a joke.”
Despite the resilience of Chinese equities, the increasingly adversarial bilateral relations have prompted some global investors to cut exposure. Three of the largest US-listed exchange-traded funds tracking Chinese stocks saw almost $1 billion outflows on Wednesday.