- Capital Economics is sceptical that further US-China trade talks will lead to a deal.
- Analyst John Higgins expects stocks in China to fall by another 8% from current levels.
Stocks in China will probably fall further despite a glimmer of hope on US-China trade tensions, Capital Economics (CE) says.
Global stocks rose overnight following reports that trade representatives from the US and China are planning to meet later this month.
Stabilisation in the Turkish lira also helped risk appetite, and the ASX has climbed this morning.
But CE says serious headwinds still remain for China’s economy.
In addition, “the resumption of trade talks between the US and China may not amount to much,” economist John Higgins said.
If the two sides do meet, it would mark the first round of negotiations since talks broke down in early June.
However, yesterday’s statement from China’s Ministry of Commerce said talks would be led by Vice Minister of Commerce, Wang Shouwen, not Vice Premier Liu.
That was seen as an indication that the next round of talks will be a lower-level discussion.
And while the trade talks sparked bullish sentiment in the US, Chinese stocks still fell into the close following the trade announcement.
The Shanghai Composite index remains stuck in a bear market, having lost almost 25% from its 2018 high reached in late January.
Higgins’ year-end forecast for the Shanghai Composite is 2,500, around 8% below the current level.
“Despite the fact that its valuation is now quite low, we doubt that the Shanghai Composite will rebound any time soon given China’s sluggish economy and ongoing trade dispute with the US,” Higgins said.
“We are sceptical that the forthcoming resumption of trade talks will lead to a deal.”
Falls were led for the second straight day by the tech-focused ChiNext index.
Those losses coincided with further falls in Hong-Kong listed internet giant Tencent Holdings, which fell by more than 3% for the third straight day.
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