In a notable development for Chinese equities, investor sentiment is cautiously optimistic following a critical meeting between U.S. President Donald Trump and Chinese President Xi Jinping. Analysts believe that discussions at the summit could potentially alleviate trade tensions that have been plaguing the relationship between the two countries, particularly benefiting China’s underperforming technology sector.
Goldman Sachs analysts are predicting that the agenda will concentrate on trade matters, focusing specifically on tariffs, semiconductor restrictions, and rare earth exports. The investment bank anticipates that China will commit to purchasing more agricultural products, energy, and aircraft from the U.S. as part of an effort to prevent any further escalation of tariffs. While the bank does not foresee a sweeping “grand bargain,” it suggests the meeting could serve as a tactical trigger for strengthening the Chinese yuan and boosting equity markets.
Dong Chen, the chief investment officer at Bank J Safra Sarasin, echoes this sentiment, describing the summit as a near-term catalyst for Chinese equities after a period of relative underperformance compared to U.S. tech stocks that have surged amid the artificial intelligence (AI) boom. Despite markets not having “extremely high expectations” for the meeting, a positive signal was perceived simply from the fact that both leaders were convening.
The importance of the summit resonates particularly with Chinese technology firms, which remain hampered by U.S. chip export restrictions. As global investors increasingly funnel money into AI-related trades—especially in South Korea and Taiwan—the need for access to advanced technology like Nvidia’s latest chips becomes critical for maintaining competitiveness in the global market. Jiong Shao, a China internet analyst at Barclays, highlighted this competitive landscape, noting that access to Nvidia chips represents a significant bottleneck for Chinese companies aiming to excel in AI.
As the summit’s outcomes trickle in, reports surfaced indicating that the U.S. government approved the sale of Nvidia’s H200 AI chips to several major Chinese tech firms, a potential milestone for China’s AI landscape. Companies like Alibaba, Tencent, ByteDance, and JD.com are included in this approval, which could help accelerate China’s abilities in the high-stakes AI arena.
Investor confidence is beginning to rise, buoyed by strong earnings from firms like Alibaba and Tencent that suggest an uptick in cloud and AI-related demand. Analysts believe that initial skepticism regarding the profitability of large AI investments is shifting as major U.S. tech firms report substantial growth in returns from their capital expenditures.
However, market activity has displayed a more tempered response overall. The Hang Seng Tech Index registered a modest increase of approximately 0.5% on Thursday, while the broader Hang Seng Index rose around 0.3%. Year-to-date, the Hang Seng Index has gained over 3%, although the Hang Seng Tech Index has seen a decline of more than 7%. Meanwhile, the mainland CSI 300 has noted a nearly 7% increase in the same timeframe. Financial experts attribute these modest movements to traders exercising caution, opting to take profits and hedge positions in the event of a disappointing outcome from the summit.
Jeff Mei, COO of BTSE Group, noted that the market is in a “wait-and-see mode” and anticipates a potential reversal and rally following the summit. He remarked that concessions from Trump could stimulate further cooperation.
Nonetheless, skepticism remains about whether any rally will significantly broaden without substantial growth in earnings. Chen pointed out that despite the positive sentiment surrounding the meeting, issues with earnings growth persist. He emphasized a growing divergence in performance between mainland-listed Chinese technology firms and their Hong Kong counterparts, with many AI beneficiaries being listed on A-shares and delivering notable results.
For now, investors remain focused on the prospect of stabilizing relations between the U.S. and China rather than expecting a sweeping geopolitical reset. The prevailing sentiment suggests hope for an extension of the current trade truce, setting the stage for potential recovery in the Chinese equity market.
