Market observers noted that the renewed escalation of U.S.-China trade tensions triggered a pullback in Chinese stocks listed in the U.S., but this would create a "buy-the-dip" opportunity. Last Friday, U.S. President Donald Trump warned of "substantial" tariff hikes on Chinese goods, followed by an announcement that additional tariffs of 100% would be imposed on Chinese goods starting November 1, along with export controls on key software. Affected by these developments, the Nasdaq Golden Dragon China Index plummeted over 6% in a single day, marking its largest decline since April this year, while the broader U.S. stock market also declined.
However, Trump subsequently signaled his willingness to reach an agreement with China, which helped improve market sentiment. In the early trading session in Asia on Monday, U.S. stock index futures had already shown gains.
Below are some perspectives from institutions:
Francis Tan, Chief Asia Strategist at Indosuez Wealth Management:
From a technical perspective, the rise in China's stock market this year has accumulated a need for a pullback. Therefore, this news will exert short-term downward pressure on China's stock market, but it is considered a healthy correction that can release some of the accumulated market pressure.
Thus, if investors have insufficient allocation to Chinese assets in their portfolios, this (technically driven) short-term decline will be a good opportunity to increase their exposure.
Analysts Edison Lee and Nick Cheng from Jefferies Hong Kong Ltd.:
The market may see further selling, but this will create more attractive entry points for stocks related to China’s artificial intelligence (AI), data centers, semiconductors, and wafer fabrication equipment.
"Trump leans more towards being a 'deal maker' rather than an 'idealist,' meaning he is willing to accept compromises, especially when the pain of the situation becomes too great or the cost-benefit ratio does not favor him. Therefore, we expect more selling in the market, but this will likely translate into buying opportunities."
Gary Dugan, Chief Executive Officer of the Global Chief Investment Office (Global CIO Office):
Geopolitical tensions between China and the United States will prompt the market to experience 'profit-taking' after a strong rally. However, from a fundamental perspective, the current situation does not exceed what we already know – tariffs have always been a 'tool' used by Trump in his negotiations.
"We view this pullback as an opportunity to position in the Asian market and technology sector, but we are also prepared to wait. Given the recent excessive market gains, this correction may last for several days rather than just a few hours."
Hao Hong, Chief Investment Officer of LOTUS Asset Management:
China’s decision not to retaliate against Trump's latest tariff threats with countermeasures, this 'de-escalation move', helps cushion the downside risks for the Chinese market.
"The current situation is different compared to the period of heightened stock market volatility in April this year. Although Trump's tariff policies have led to a pullback in U.S. stocks from their record highs, China’s stock market, despite outperforming globally so far this year, remains at a low valuation."
Editor/Rocky