Hong Kong and China stocks soared on Friday, propelled by reports that the US and China have reached an agreement on a "phase one" trade deal.
The Shanghai Composite Index posted its best daily performance in nearly four months. The benchmark jumped 1.8 per cent to close at 2,967.68, recording the biggest daily gain since August 19. The Shenzhen Component Index rose 1.7 per cent to 10,004.62.
In Hong Kong, the Hang Seng Index closed 2.6 per cent higher at 27,687.76, making it the third straight day of gains, with 48 of its constituents rising and only one declining. That represents its best one-day gain since September 4.
US President Donald Trump has approved an initial deal to resolve the US-China trade war, multiple US media outlets including Bloomberg News reported on Thursday. As a result, additional US tariffs on around US$160 billion of Chinese goods scheduled to kick in on Sunday are likely to be delayed.
Meanwhile, exit polls in the UK general elections showed Boris Johnson winning comfortably, suggesting a higher possibility of his Brexit deal going through and reduced uncertainty in the market.
"The market is getting two Christmas presents early," Tai Hui, Asia chief market strategist at JPMorgan Asset Management, said in a note on Friday.
But he also said investors should not get carried away, as many uncertainties still remain. "The future stages of (US-China) negotiation are going to be much more challenging, when it starts to involve China's industrial policy and technological development," he said.
Over the week, the Hang Seng Index advanced 4.5 per cent, recording its best weekly gain in almost six months. The Shanghai benchmark gained 1.9 per cent during the week, its best performance in nine weeks.
In Hong Kong, Macau casino stocks led the gains, ahead of the 20th anniversary of the former Portuguese colony's handover to China next Friday, and amid reports of a new stock exchange in the planning.
MGM China Holdings surged 7.8 per cent to HK$13, while Wynn Macau jumped 5.8 per cent. Melco International Development gained 4.6 per cent. The advances came after Reuters on Thursday reported President Xi Jinping will visit Macau next week to announce a raft of supportive policies for the city to help transform it into a financial centre.
The policies, including establishing a new yuan-denominated stock exchange, are regarded by officials as a reward for Macau for having avoided the political crisis and anti-government protests that have roiled Hong Kong, the report said.
Also on the rise was smartphone maker Xiaomi, which rallied after being recommended by analysts. The stock jumped 4.7 per cent to HK$10.4, its highest level since May. It dipped 0.6 per cent on Thursday, after soaring by 8.5 per cent a day earlier on the launch of a new affordable 5G phone model.
Analysts at China Merchants Securities raised their 12-month target price for Xiaomi by 30 per cent to HK$13. The new phone, the world's first 5G phone sold at below 2,000 yuan (US$287), will give Xiaomi the edge to regain market share in the smartphone sector starting from the first quarter next year, the analysts wrote in a report on Friday.
Citic Securities said on Friday "a turning point for Xiaomi's earnings has come". "Xiaomi's smartphone business has bottomed out," analysts led by Chen Junyun wrote. "The current forward price-to-earnings ratio is only 17 times, reflecting an overly pessimistic market view on the company."
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