Handshake or arm-wrestling match? What China’s stock traders expect from Xi-Trump meeting

Hope for material results is slim, but investors remain wary of volatility while banks forecast ‘fragile detente’ will continue

The coming meeting between Chinese President Xi Jinping and his US counterpart Donald Trump is on the radar of market traders in mainland China and Hong Kong, as the results – whether smiling handshakes or a tense test of wills – could lead to market volatility.

However, current market expectations of substantial results from the meeting are so low that investors have so far put the event on the back burner when considering variables that will jolt stocks.

Many stock traders are paying less attention to the sit-down scheduled for September 24 in the US than they did to Trump’s state visit to China in May, even as signs of a flare-up of tensions between the world’s two largest economies are emerging.

It is widely expected that the two leaders will extend the current trade agreement and sign some industry-specific pacts, while key structural issues and differences will remain unresolved.

“Investors should not be too excited about Xi’s trip to the US, given we do not expect any outcome which is materially supportive for China’s or Asia’s equity markets,” said William Bratton, head of cash equity research for Asia-Pacific at BNP Paribas.

“Our base case expectations for the trip are an ongoing commitment to ‘constructive strategic stability’, the finalisation of earlier agreed trade commitments and an extension of the [tariff] truce.”

Stock reactions have been subdued in the run-up to the leadership summit. Mainland China’s CSI 300 Index has dropped nearly 4 per cent over the past month, while Hong Kong’s Hang Seng Index has retreated 1 per cent, largely reflecting fears of monetary tightening in the US.