Chinese Assets Surge as Risk Appetite Rebounds Amid Tariff Delay

On July 8 (U.S. time), the three major U.S. stock indices experienced mild fluctuations with mixed closing performance, while Chinese assets rallied significantly. The Nasdaq Golden Dragon China Index rose as much as 2% before narrowing to close up 0.71%. The 2x Leveraged ETF for Chinese Internet Stocks recorded a gain of 3.35%, while the 3x Leveraged FTSE China ETF rose 2.87%. ETFs tracking Chinese overseas internet and tech stocks also closed with gains of nearly 2%. Huami Technology surged over 107% intraday, triggering a circuit breaker, and eventually closed more than 47% higher. Other notable gains included Lake Shore Biopharma exceeding 40%, Mogu Inc. over 24%, Daqo New Energy over 10%, Tiger Brokers over 8%, and several others including Xunlei, WeRide, and Aihuishou rising more than 7%.

During the same day’s Asian session, both A-shares and Hong Kong stocks rallied across the board. The Shanghai Composite Index rose 0.7% to approach 3,500 points, the Shenzhen Component Index gained 1.46%, and the ChiNext Index jumped 2.39%. The Hang Seng Index advanced 1.09% to reclaim the 24,000-point level, while the Hang Seng Tech Index increased by 1.84%. Financial stocks led gains in the Hong Kong market, with Guotai Junan International up more than 28%, Shenwan Hongyuan Hong Kong up over 19%, and Bright Smart Securities & Commodities Group climbing over 15%.

Analysts attributed the rebound to a postponement of tariff concerns following former President Trump’s executive order delaying the “reciprocal tariffs” from July 9 to August 1. This easing of sentiment raised market risk appetite and lifted equities. Market participants expect the final tariff rate from the U.S. may not be as aggressive as previously threatened. JPMorgan strategists noted that investors should consider hedging before the new tariff deadline, while Piper Sandler analysts stated that despite potential short-term pressures, the broader market remains bullish.

China Galaxy Securities pointed to strong policy support, earnings growth, and favorable valuations as factors sustaining opportunities in the technology sector. It also highlighted improved earnings expectations in the consumer sector under domestic consumption stimulus, with a particular focus on pharmaceuticals and discretionary goods. Amid domestic and international uncertainties, high-dividend stocks were viewed as a source of stable returns. Shenwan Hongyuan Securities added that the breakout in the Shanghai Composite became a key market catalyst, enhancing sentiment and expanding profit-making opportunities, especially within thematic trends such as stablecoins, defense, and insurance-weighted bank stocks.

In a related development, Goldman Sachs projected that by the end of 2025, onshore and offshore Chinese-listed firms will distribute RMB 3 trillion in dividends, setting a new historical record. In 2024, more than 4,300 Chinese companies across A-shares, Hong Kong, and U.S. markets distributed RMB 2.7 trillion in dividends. Goldman attributed the growth to strong policy backing, particularly after the new “Nine-Point Guideline” was issued in April 2024 by the State Council, which encouraged higher dividend payments and placed restrictions on companies with low or no dividends. The report further estimated that total dividends and buybacks could reach RMB 3 trillion and RMB 0.6 trillion respectively by 2025, marking year-on-year increases of 10% and 35%. Goldman concluded that this scale of capital return would enhance valuations, with a 10% allocation to dividends or buybacks potentially raising company valuations by 14%, and if payout ratios aligned with regional averages, A-share valuations might rise by 15% to 25% over the next decade.