China Investors Hail Potential Xi-Trump Summit as Boost to Trade Detente

China Investors Pin Hopes on Xi-Trump Summit to Sustain Trade Detente

China investors are counting on the upcoming summit between Xi Jinping and Donald Trump to deliver a broadly constructive outcome that sustains the current trade detente underpinning stocks and the yuan. Rather than betting on a sweeping reset in relations, market watchers are focused on whether the two leaders can avoid renewed friction on trade, technology, and geopolitics.

A cautious optimism has investors choosing tactical rather than structural bets on Chinese assets, which have gained since the two sides reached a trade truce in South Korea last October. Staying long the yuan and selectively buying stocks poised to benefit from currency stability, export resilience, domestic technology investment, and demand for artificial intelligence are among the favored trades.

Tai Hui, chief market strategist for Asia Pacific at JPMorgan Asset Management in Hong Kong, said the ideal scenario would be for the status quo to continue. "Tariffs and trade tensions have taken a backseat on investors' minds for now, given the supply risk to energy and petrochemicals."

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The summit, which marks the first visit by a sitting US president to China in nearly a decade, is expected to produce deals at the margins, such as Chinese purchases of additional US soybeans or Boeing planes. China's markets have had a good run ahead of the event, suggesting investors see little risk of a sharp deterioration in ties between the world's two largest economies.

The onshore yuan has been buoyed by improving US-China ties and weakness in the greenback. Goldman Sachs Group Inc. expects the currency to keep rising over the coming year, arguing that it is more than 20% undervalued.

The Iran war is expected to be high on the agenda, with the US and China both wanting to see the reopening of the Strait of Hormuz. Beijing is expected to seek a quid pro quo from Washington in return for putting pressure on Tehran.

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| Analyst Expectations | | --- | --- | | CSI 300 Index | Up 11% so far this quarter | | CSI 300 Index | Jumps 1.6% on Monday |

Markets do remain vulnerable to any negative surprises, with a setback in talks likely to reverse sentiment and erode recent gains. However, Goldman's equity strategists predict stocks could see near-term upside as investor expectations stay low ahead of the summit.

"What that summit can do is it can compress some of the uncertainty premium that continually persists between the US and China from a geopolitical perspective," said Christopher Hamilton, head of client investment solutions for Asia Pacific ex-Japan at Invesco Ltd. "If you can bring a little bit more certainty to that relationship and drive that risk premium down, that's ultimately going to be very positive for Chinese equities."