The China-US trade negotiations are showing signs of hope. Morgan Stanley stated that due to optimistic expectations for progress in the trade talks, hedge funds, especially those in the USA, have increased their bullish bets on Chinese Stocks.
According to the Zhitong Finance APP, a glimmer of hope has emerged in the US-China trade negotiations. Morgan Stanley stated that due to optimistic expectations for progress in the trade talks, hedge funds, especially those in the USA, have increased their bullish bets on Chinese Stocks.
The report released last Friday pointed out that after seeing bullish signals indicating a potential trade agreement, US hedge funds have re-embraced the Chinese market by increasing their shareholding in US-listed Chinese stocks and domestic A-shares.
Meanwhile, the report stated that hedge funds have reduced their hold positions in most areas of Asia, including Thailand, Hong Kong, India, and Australia.
The US and China held key trade negotiations over the weekend in Geneva, Switzerland. In the lead-up to the talks, the MSCI Chinese Index and the CSI 300 Index rose by 2.4% and 1.9%, respectively.
After the two-day Geneva negotiations, US and Chinese officials expressed positive attitudes. Prior to the negotiations, President Donald Trump signaled a de-escalation of trade tensions by stating that imposing an 80% tariff on Chinese goods 'seems reasonable'. This marked his first specific proposal for tariff reduction after increasing tariffs on Chinese imports by 145%.
In the week following Trump's announcement of increased tariffs, the Chinese stock market experienced a significant drop, but it began to rebound afterward. Currently, the CSI 300 Index and the Hang Seng Index have essentially returned to the levels from when Trump announced the overall tariff increase on April 2.
Morgan Stanley added that hedge funds' risk exposure in the Chinese market is still far below peak levels.
Michael Dell, the Director of Multi-Asset Long/Short Strategy at M&G Investment Company, revealed that the company recently increased its investment in the China market.
We cannot accurately predict the trends of the China market. However, at some point, its risk-return profile is highly attractive. Dell mentioned that the global investors' shareholding in the Chinese stock market is at an extremely low level, and the valuations of Chinese stocks are relatively low.
Editor/Lee
