China's Markets Reopen Amid US Trade Tensions and AI Sector Surge

China markets return from holiday facing trade war and AI rally

China's markets resume after a holiday amid a fresh trade dispute with the U.S. and volatility in the global artificial intelligence sector. Key indicators include Beijing's responses to tariffs and economic support measures. Chinese AI stocks could surge due to DeepSeek's new AI model, despite global market concerns driven by Trump's tariffs.China's markets return from a week's break on Wednesday to a fresh trade dispute with the United States and ructions in the global artificial intelligence sector. Investors said they are watching for what Beijing would do to bolster confidence. The early signs point to a measured open for stock markets on the Mainland. Tariffs so far have been less than what the Trump administration had initially indicated and relief was evident in Hong Kong, where Chinese stocks rallied this week. Enthusiasm around China's artificial intelligence company DeepSeek is also likely to bolster AI stocks. Still, investors will look for signals from Beijing on how it sets the tone for things to come. One of the first such signals would come on Wednesday from where the central bank fixes the yuan, the midpoint in the trading band within which it allows the currency to trade on any given day, analysts said. Yuan's weakness helped blunt the impact of tariffs in U.S. President Donald Trump's first term as president, and the fix could hold clues to China's negotiating stance on tariffs. Mainland stock markets are also likely to take their cue from Hong Kong, which opened two days earlier after the Chinese New Year holiday. Chinese stocks there rose strongly on Tuesday, despite a move by the Trump administration to impose 10% tariffs on Chinese imports. Much has happened during China's week-long Lunar New Year holiday. Over the weekend, Trump imposed levies on goods from China, a move that prompted Beijing to announce targeted tariffs on U.S. imports and put several companies, including Google, on notice for possible sanctions. Trump's actions, which also included duties on Mexico and Canada, jolted global markets. The tariffs came as the world of artificial intelligence -- another major driver for global stocks over the past year -- was roiled when China's DeepSeek unveiled a cheaper AI model just a day before China went on break. That triggered a selloff across technology stocks as investors reassessed the sector's value. Even so, there was some relief for markets, too. Although he described the initial tranche of tariffs on China as an "opening salvo," they were lower than what Trump has threatened in the past. And the president also gave reprieve to two other trading partners - Canada and Mexico - leading investors to believe that China could strike a deal as well. Trump and Chinese leader Xi Jinping are expected to speak soon, although the timing of the conversation is not clear. "Any sign that Xi and Trump have a 'good talk' or both countries expressed commitment to work on a deal should qualify as a temporary truce and be supportive of sentiments," said Christopher Wong, a currency strategist at OCBC Bank. Expectations Beijing will do more to support its economy in the face of U.S. tariffs, relief that the tariffs were lower than what Trump had initially threatened and bullishness on the AI and electric vehicle sectors drove gains in Hong Kong. Chinese companies listed in Hong Kong rallied more than 4% this week to a three-month high, and tech heavyweights rallied nearly 7%. The offshore yuan has shed 0.6% against the dollar since Jan 27, when mainland markets closed for the holiday, and hit a lifetime low this week. Onshore, the yuan closed at 7.2469 last week. Investors will see any attempts by China to weaken the currency as a hint Beijing expects a protracted war and is using the yuan to counter the effect of tariffs, as it did during Trump's first term in 2018. "On the whole, having a trade war is not what the market wants... but investors are less likely to panic this time," said Elizabeth Kwik, investment director of Asian equities at abrdn, referring to how markets had been positioning for trade tensions for months. "The underlying market for Hong Kong is very similar to China, so they should move in the same direction. Market reaction should not be too negative." AI BETS Artificial intelligence-related stocks are likely to rise as they play catch-up to stocks in Hong Kong, riding on bullishness on local technology firms spurred by DeepSeek. China's top chipmaker SMIC surged 8.5% to a record high in Hong Kong on Tuesday, and peer Hua Hong Semiconductor advanced 12.7%. DeepSeek's development "provides reason to be more optimistic on China's domestic AI players" despite U.S. tech curbs, said Jason Chan, a senior investment strategist at Bank of East Asia. Their cheaper valuations compared with global peers could also be a tailwind, he said. China's benchmark blue chip index fell 3% in January as investors fretted over the increasingly volatile macro outlook and Beijing's tepid policy response. Weak economic growth in the world's second-largest economy and trade risks could put pressure on policymakers to roll out more forceful support measures, investors said. "China will need to deal with domestic issues including property and consumption, and improve the economic fundamentals regardless of how the tariff war pans out," said abrdn's Kwik.

China markets return from holiday facing trade war and AI rally

SHANGHAI/HONG KONG (Reuters) - China's markets return from a week's break on Wednesday to a fresh trade dispute with the United States and ructions in the global artificial intelligence sector. Investors said they are watching for what Beijing would do to bolster confidence. The early signs point to a measured open for stock markets on the Mainland. Tariffs so far have been less than what the Trump administration had initially indicated and relief was evident in Hong Kong, where Chinese stocks rallied this week. Enthusiasm around China's artificial intelligence company DeepSeek is also likely to bolster AI stocks. Still, investors will look for signals from Beijing on how it sets the tone for things to come. One of the first such signals would come on Wednesday from where the central bank fixes the yuan, the midpoint in the trading band within which it allows the currency to trade on any given day, analysts said. Yuan's weakness helped blunt the impact of tariffs in U.S. President Donald Trump's first term as president, and the fix could hold clues to China's negotiating stance on tariffs. Mainland stock markets are also likely to take their cue from Hong Kong, which opened two days earlier after the Chinese New Year holiday. Chinese stocks there rose strongly on Tuesday, despite a move by the Trump administration to impose 10% tariffs on Chinese imports. Much has happened during China's week-long Lunar New Year holiday. Over the weekend, Trump imposed levies on goods from China, a move that prompted Beijing to announce targeted tariffs on U.S. imports and put several companies, including Google, on notice for possible sanctions. Trump's actions, which also included duties on Mexico and Canada, jolted global markets. The tariffs came as the world of artificial intelligence -- another major driver for global stocks over the past year -- was roiled when China's DeepSeek unveiled a cheaper AI model just a day before China went on break. That triggered a selloff across technology stocks as investors reassessed the sector's value. Even so, there was some relief for markets, too. Although he described the initial tranche of tariffs on China as an "opening salvo," they were lower than what Trump has threatened in the past. And the president also gave reprieve to two other trading partners - Canada and Mexico - leading investors to believe that China could strike a deal as well. Trump and Chinese leader Xi Jinping are expected to speak soon, although the timing of the conversation is not clear. "Any sign that Xi and Trump have a 'good talk' or both countries expressed commitment to work on a deal should qualify as a temporary truce and be supportive of sentiments," said Christopher Wong, a currency strategist at OCBC Bank. Expectations Beijing will do more to support its economy in the face of U.S. tariffs, relief that the tariffs were lower than what Trump had initially threatened and bullishness on the AI and electric vehicle sectors drove gains in Hong Kong. Chinese companies listed in Hong Kong rallied more than 4% this week to a three-month high, and tech heavyweights rallied nearly 7%. The offshore yuan has shed 0.6% against the dollar since Jan 27, when mainland markets closed for the holiday, and hit a lifetime low this week. Onshore, the yuan closed at 7.2469 last week. Investors will see any attempts by China to weaken the currency as a hint Beijing expects a protracted war and is using the yuan to counter the effect of tariffs, as it did during Trump's first term in 2018. "On the whole, having a trade war is not what the market wants... but investors are less likely to panic this time," said Elizabeth Kwik, investment director of Asian equities at abrdn, referring to how markets had been positioning for trade tensions for months. "The underlying market for Hong Kong is very similar to China, so they should move in the same direction. Market reaction should not be too negative." AI BETS Artificial intelligence-related stocks are likely to rise as they play catch-up to stocks in Hong Kong, riding on bullishness on local technology firms spurred by DeepSeek. China's top chipmaker SMIC surged 8.5% to a record high in Hong Kong on Tuesday, and peer Hua Hong Semiconductor advanced 12.7%. DeepSeek's development "provides reason to be more optimistic on China's domestic AI players" despite U.S. tech curbs, said Jason Chan, a senior investment strategist at Bank of East Asia. Their cheaper valuations compared with global peers could also be a tailwind, he said. China's benchmark blue chip index fell 3% in January as investors fretted over the increasingly volatile macro outlook and Beijing's tepid policy response. Weak economic growth in the world's second-largest economy and trade risks could put pressure on policymakers to roll out more forceful support measures, investors said. "China will need to deal with domestic issues including property and consumption, and improve the economic fundamentals regardless of how the tariff war pans out," said abrdn's Kwik. (Reporting by Jiaxing Li; Editing by Vidya Ranganathan and Paritosh Bansal and Anna Driver)

HK-listed Chinese stocks up even as China, US tariffs roll

Chinese stocks in Hong Kong surged as investors focused on artificial intelligence and electric vehicle shares, despite new tit-for-tat tariffs between China and the U.S. AI-related stocks and the EV sector led the rally, while the market anticipates upcoming trade negotiations and the National People's Congress meeting.Chinese stocks listed in Hong Kong surged on Tuesday as investors loaded up on artificial intelligence and electric vehicle shares while shrugging off news of tit-for-tat Sino-U.S. tariffs on each others' goods. China's finance ministry announced a package of tariffs on a range of U.S. products in an immediate response to a 10% new tariff on Chinese imports announced by U.S. President Donald Trump that went into effect at 0501 GMT. Investors had been hoping Trump would retract the proposal to raise tariffs on China at the last minute, just as he did with Canada and Mexico on Monday. But as the deadline passed and U.S. tariffs came into force, China announced its own levies of 15% for U.S. coal and LNG and 10% for crude oil, farm equipment and some autos. The new tariffs on U.S. exports will start on Feb. 10, China's finance ministry said. Trump's press secretary said the president will speak with Chinese President Xi Jinping in the next couple of days. "China is trying to get some bargaining power before getting close to the negotiating table. It doesn't mean that they will not go for negotiation talks," said Steven Leung, who handles institutional trading at stockbroker UOB-Kay Hian in Hong Kong. Leung said the market will be relieved once the two sides agreed on a time for the trade talks, but that will take time. China's initial proposal to tariffs imposed by U.S. President Donald Trump's administration will centre on restoring the "Phase 1" trade deal signed in 2020 during Trump's first term, the Wall Street Journal reported on Monday, citing sources. "There will still be a lot of all these uncertainty and noises over the next few days," Leung said, and that investors should prepare for short-lived selloffs. The Hang Seng China Enterprises Index was last up 2.2%, off the three-month high it hit earlier in the day, while Hang Seng Tech Index surged 3.6%. The benchmark Hang Seng index added 2%. AI-related stocks led the rally as investors continued to pile up wagers on home-grown firms after startup DeepSeek released a large language model at a cheap cost. China's top chipmaker SMIC was also trading near the record high it hit early in the day, and peer Hua Hong Semiconductor advanced 8.7%. The EV sector also lifted the market, with carmaker XPeng jumping 12.6% after the company said it delivered a nearly three-fold increase in smart EVs in January year-on-year. Financial markets in mainland China will reopen on Wednesday after the long Lunar New Year holiday. China's benchmark blue-chip index fell 3% in January before the holiday, surrendering nearly half of September's 40% rally. The markets may look through the political noise to focus on China's responses to U.S. tariffs and the upcoming National People's Congress (NPC) meeting in the next few weeks, analysts at Citi said in a note. Capital Economics said the additional 10% tariff that Donald Trump has applied on Chinese goods will have a relatively modest impact on China's economy, especially if the PBOC allows the yuan to adjust, but predicted the trade war with the U.S. will be protracte