Asia Bets on Trade Deal

Asia Bets on Trade Deal

Asian markets rose Monday on growing optimism for a trade deal between China and the United States after reports said the two sides were close to a breakthrough.

With a busy week of data releases and events coming up, investors got off to a positive start as they cheered stories saying the tariffs stand-off between world’s top two economies that has dragged on global growth could soon be resolved.

The Wall Street Journal said negotiations last month had narrowed key differences and an agreement could be ready for signing at a summit between Donald Trump and Xi Jinping in late March.

The newspaper, as well as Bloomberg News, also said Beijing had tentatively agreed to lower tariffs or ease certain restrictions, work quicker to open up its auto market and increase its purchases of US goods.

In exchange for Chinese concessions, Washington would do away with most of the trade sanctions it imposed last year, the reports said.

Shanghai led gains on Monday, rising more than one percent, while Hong Kong put on 0.3 percent and Tokyo headed into the break 0.8 percent better off.

Sydney rose 0.5 percent and Singapore 0.1 percent, while Seoul put on 0.3 percent, Wellington edged up 0.6 percent and Jakarta 0.3 percent.

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– ‘Much-needed lift’ –

Tai Hui, Asia-Pacific chief market strategist at JP Morgan Asset Management, said that while there were a number of hurdles to a final agreement such as on intellectual property rights, traders were broadly confident.

“Investors are fully aware of these long-term challenges, but a more sustained ceasefire on tariffs will help to reduce business uncertainty. This could provide a much-needed lift to business sentiment and improve growth momentum entering the summer,” he said.

Focus turns Tuesday to the start of China’s annual National People’s Congress where it will unveil its growth forecast for this year, while dealers will be looking for any measures to stimulate the stuttering economy.

This week also sees the release of Chinese trade data and key US jobs figures, which will provide a fresh look at the state of the US economy and the Federal Reserve’s monetary policy plans.

On currency markets the dollar extended gains against the safe-haven yen as dealers became more confident, while the greenback was down against most high-yielding units including the Australian dollar, South African rand and Thai baht. China’s yuan was holding around eight-month highs.

Adding to dollar weakness were comments from Trump hitting out at a strong currency.

“I want a strong dollar but I want a dollar that does great for our country, not a dollar that’s so strong that it makes it prohibitive for us to do business with other nations and take their business,” he said during a speech at the Conservative Political Action Conference in Maryland on Saturday, according to Bloomberg News.

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S. Jack Heffernan Ph.D. Funds Manager at HEFFX holds a Ph.D. in Economics and brings with him over 25 years of trading experience in Asia and hands on experience in Venture Capital, he has been involved in several start ups that have seen market capitalization over $500m and 1 that reach a peak market cap of $15b. He has managed and overseen start ups in Mining, Shipping, Technology and Financial Services.

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