Asian markets extend gains as trade hopes persist

HONG KONG: Optimism that China and the United States will eventually resolve their trade conflict kept Asian investors buoyant on Thursday, while emerging market currencies held gains after Beijing’s pledge not to weaponise the yuan in the standoff.

Regional markets have been on the rise this week after the two sides’ latest tit-for-tat tariffs were considered lenient and allowed for talks, with observers suggesting a further escalation was unlikely before the end of the year.

And while China on Wednesday hit back at Donald Trump’s accusation that it is using the trade conflict to affect November’s key mid-term elections, the generally upbeat sentiment continued into a third day.

Tokyo ended the morning session up slightly to sit around a three-year high, while Hong Kong rose 0.8 per cent and Shanghai added 0.3 per cent.

Singapore gained 0.2 per cent and Seoul put on 0.7 per cent with Jakarta rising 0.5 per cent.

However, Wellington eased 0.2 per cent despite data showing the New Zealand economy grew at its fastest in two years during the second quarter. Sydney and Taipei also both eased 0.2 per cent.

“With both the US and China likely to resume negotiations, expectations are still there for a resolution before President Trump deems it necessary to double down on tariffs,” said Stephen Innes, head of Asia-Pacific trade at OANDA.

The broadly positive performance followed a healthy lead from Wall Street, with all three main indexes pushing closer to record highs.

‘Encouraging’

On foreign exchanges, embattled emerging market (EM) currencies are enjoying some much-needed buying support, having been beaten down by trade war fears in recent months, as well as concerns of a spillover from crises in Argentina, South Africa and Turkey.

Analysts said that as well as the easing trade tensions, a key boost for the currencies was Premier Li Keqiang’s statement that China would not devalue the yuan to fend off the effects of any tariffs.

“China will never rely on the depreciation of the renminbi (yuan) to stimulate exports, because a one-way depreciation of the renminbi exchange rate will have more disadvantages than advantages,” he told an economic forum.

“The premier’s comments are encouraging as they indicate that China won’t actively use its currency as a weapon in its trade scuffle with the US,” said Rodrigo Catril, senior forex strategist at National Australia Bank.

However, he added: “As we have seen in recent months this doesn’t necessarily mean that China will prevent the yuan from weakening if market forces push the currency lower.”

A devaluation in 2015 sent world markets and EM currencies plunging.

On Thursday, South Korea’s won rose 0.2 per cent, while Indonesia’s rupiah and the Thai baht both added 0.3 per cent.

The Malaysian ringgit edged up 0.1 per cent and Turkey’s lira climbed 0.8 per cent.

Oil prices extended Wednesday’s gains, which were spurred by data showing US stockpiles fell to a three-year low, indicating strengthening demand and offsetting concerns about the possible impact of a trade war.