(Bloomberg) -- President Donald Trump gave China’s stock market a pleasant surprise by not announcing any tariffs on the Asian nation on his first day in office. But investors aren’t resting easy.
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Trump, who threatened tariffs of as much as 25% on Mexico and Canada by Feb. 1, left traders guessing on his China plans by declining to say when he would impose additional levies. While Chinese stocks in Hong Kong gained more than 1% on Tuesday, the uncertainty has some investors bracing for more volatility in the days ahead.
For Ronald Temple, chief market strategist for Lazard’s Financial Advisory and Asset Management businesses, it isn’t yet time to buy Chinese stocks.
“I would be reluctant to add any exposure to China now because the markets have not priced the risk of tariffs being imposed on China appropriately,” Temple said in an interview Tuesday. “The actual announcement of tariffs will probably give you a sell off in Chinese equities and maybe more broadly EM equities.”
Expectations on Trump’s action on China had dominated market moves heading into his inauguration. Stocks had run up in recent sessions as Bloomberg News reported last week that Trump’s team was considering taking a gradual approach to raising tariffs. Prior to that, concerns about an escalation in trade tensions as well as China’s economic slowdown had caused the MSCI China Index to enter a bear market.
Volatility spikes are expected to be a common feature for the next four years, given Trump’s unpredictability on policies.
Read: Xi Dodges Early Trump Tariffs, Buying China Time to Influence US
Tuesday’s market performance also suggests investors are taking Trump’s lack of immediate assault on China with a grain of salt.
The CSI 300 Index, a benchmark of onshore shares, erased a bulk of its 0.6% rise to end the day up just 0.1%. The offshore yuan weakened 0.4% after strengthening more than 1% overnight.
Global markets went on a rollercoaster ride as investors tuned into a flurry of executive orders signed by Trump. A Bloomberg gauge of the dollar gained 0.5% after sliding more than 1% on Monday. Ten-year US Treasury yields fell as much as 10 basis points in Asia on Tuesday, as traders recalibrated inflation bets stoked by fears of higher tariffs immediately.