China Stocks Jump in Afternoon Trading in Rebuff to Trump Levies

(Bloomberg) -- Chinese stocks surged in late trading amid expectations the government will take steps to offset the negative effect of U.S. tariffs.

The Shanghai Composite Index closed 1.8 percent higher, reversing earlier losses. Industrial companies led gains after the Economic Information Daily reported officials may announce measures to help build transport networks, while stocks also received a lift from speculation state-backed funds, known as the national team, were buying shares.

"Investors are betting China will boost infrastructure investment and drive domestic demand to counter the impact of a trade war," said Sun Jianbo, president of China Vision Capital Management in Beijing.

After the market closed, the commerce ministry announced it will impose retaliatory measures simultaneously with the U.S. The U.S. tariffs bring new uncertainties to trade talks, it added. Chinese Foreign Ministry spokesman Geng Shuang said at a briefing in Beijing the U.S. hasn’t shown any goodwill in the dispute.

China Stocks Jump in Afternoon Trading in Rebuff to Trump Levies

Chinese assets are among the world’s worst performing this year as the U.S. actions threaten to aggravate an economic slowdown and complicate Beijing’s efforts to cut debt in the financial system. The yuan has tumbled more than 8 percent since the end of March, while the benchmark stock gauge has fallen 15 percent.

The U.S. will slap a 10 percent tariff on the goods next week and increase the rate to 25 percent on Jan. 1. If Beijing retaliates against U.S. farmers and industry, the U.S. will immediately pursue further tariffs on about $267 billion of Chinese imports, President Donald Trump said in a statement Monday evening, repeating a threat he made earlier this month.

Fang Xinghai, vice chairman of the China Securities Regulatory Commission, said the country could withstand “the worst” that could happen. Trump’s tactic of trying to pressure China into trade concessions wouldn’t work because the economy was too strong, he said on a panel at a meeting of the World Economic Forum in Tianjin on Tuesday.

The central bank injected a net 200 billion yuan ($29 billion) via open-market operations on Tuesday, the most in two months. The Shanghai Composite Index closed on Monday at 2,651.79, the lowest level since November 2014.

"The market suspects the national team entered the market to support SOE and infrastructure stocks" at the 2,650 level, said Ken Chen, a Shanghai-based analyst at KGI Securities. "China’s economy may have more downward pressure due to the trade war so investors expect the government to further ease monetary and fiscal policy, which also benefits the infrastructure sector."

China Railway Construction Corp. and China Communications Construction Co. both rose by the 10 percent daily limit in mainland trading. Stocks in Hong Kong also rebounded, with the Hang Seng Index adding 0.6 percent at the close to erase a 1.1 percent slide. The yuan declined 0.1 percent to 6.8650 per dollar as of 4:21 p.m. in Shanghai.

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