Your guide on what the 2024 American elections mean for Washington and Le Monde
When the American presidents give their opinion on China, this rarely constitutes good news for investors in Chinese shares. At least in recent years, the announcements have tended to mark punitive measures such as black lists, export restrictions and customs duties.
This trend was reversed on Friday. Chinese actions increased after Donald Trump pointed out a friendly conversation with Xi Jinping and alluded to a potentially softer approach in terms of customs duties. Diplomatic cordiality between geopolitical rivals may not guarantee lasting progress in commercial negotiations. Yet for local stocks, it happens at an ideal time.
The star values such as Tencent, Alibaba and JD.com won 3% on Friday, as well as the Hong Kong reference index, particularly sensitive to geopolitical tensions. The Hang Seng has increased by about 2 percent, bringing the 6 percent gains since last week. This suggests a relief that Trump said he would prefer not to have customs duties on Chinese products, a big question that weighs on valuations of the past year.
Chinese exports to the United States represent approximately 4 percent of their GDP. In the short term, customs duties increase the costs for Chinese exporters and reduce the margins. Their long -term effects, such as the weakening of the renminbi and the swelling of the risk premium for Chinese actions, arouse concerns about the flight of capital. If Trump adopts a more flexible approach, these measures could end up being used as a tool for negotiating with China rather than a final objective.
This allows investors to take into account other factors likely to support Chinese actions in the future. Beijing is trying to improve yields for shareholders. Large -scale recovery measures and plans to inject approximately 1 billion RMB ($ 138 billion) of long -term capital in the financial system should improve confidence.
Chinese companies paid a record amount of 2.4 billion RMB of dividends last year, while share buybacks also reached a record level, according to official data. This push particularly benefited the actions with high dividend, such as banks, insurers and public services. At the same time, regulators have ordered common -law insurers and funds to increase their detention of local shares, which could attract more capital in the country's markets.
The valuations remain relatively low, the Chinese Chinese index CSI 300 exchanging at around 1.3 times its accounting value. On the other hand, the S&P 500 is about four times this level.
The dependence on the profits of local exporters to geopolitical dynamics means that the course of their actions will remain very sensitive to the evolution of the situation in the coming months. But for the moment, there are enough good news, both real and rhetorical, to support short -term gains.
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