Who’s afraid of the US-China trade war? No, not the investors, actually. Chinese shares continue to be bought by investors around the globe.
US President Donald Trump and Chinese President Xi Jinping agreed to call off the trade war, at least for now. The two leaders’ discussion at the recent G-20 Summit in Japan has been a fruitful one, enough to temporarily calm the global market.
This temporary assurance has become an opportunity for foreign investors to finally buy shares that they call ‘A-Shares’.
A-Shares are the stocks of Chinese companies listed in Shanghai and Shenzhen which are yuan-dominated. For the last 12-18 months, foreign investors are in a search for an opportunity on how to purchase these shares. This observation was from UBS Securities President Eugene Qian.
Game (Not) Over
Let’s take a look back at the Trump-Xi agreement at the G-20 Argentina last year. They agreed to a ceasefire in their bitter trade war, meaning there would be no escalated tariffs.
Just when market experts believed that a deal could be reached soon, it only took a few months for the U.S. to slap tariffs on Chinese products. President Trump’s announcement via Twitter caused havoc on global financial markets. China then hit back with increased tariffs on U.S. goods.
History shows that the U.S. is not that keen on stable and peaceful trade relations (at least with China). There is a high risk that the pattern will be repeated.
Investors should not make a mistake of sleeping too soundly just because of the temporary truce. There’s a possibility that a strong storm is yet to come.
It’s good that the two presidents have calmed everyone with their promised agreement. The visible agreement of the two most powerful nations in the world is enough to calm the shivering investors.
But as the overused cliche goes – ‘there is always a calm before the storm’.
Also read: US and China Agree on Tentative Trade Truce Ahead of G20
