Trump or Harris? China, Hong Kong stocks offer hint at preference for White House occupant

US vice-president Kamala Harris and former president Donald Trump agreed on very little during their debate last week, but both favour a tough stance towards the world’s second-largest economy, using technology restrictions or tariff hikes. Regardless of the election outcome, geopolitical tensions will continue to haunt Chinese stocks for another four years, according to Daiwa Securities Group.

Fallout from the debate may exacerbate negative sentiment towards China’s US$8 trillion stock market, where the benchmark CSI 300 Index slumped to its lowest level in more than five years last week amid concerns about a dire growth outlook. The gauge has surrendered all of the gains that direct state buying of stocks and exchange-traded funds sparked earlier this year, underscoring the failure of a regulatory effort to hold the decline in check.

China’s assets and economy may face further downside risks after the US election, and policy support needs to ramp up, according to China Merchants Securities.

“If Harris is elected, she will very likely retain the tariffs imposed by the Biden administration on key Chinese products [such as electric vehicles],” said Zhang Jingjing, an analyst at the brokerage. “If Trump wins, Chinese exports will be front-loaded in the near term before falling afterwards, given all-out tariffs are his fundamental policy. More active domestic policies will be needed to counter the fallout.”

In the debate, Harris criticised her rival for not doing enough to protect US interests against China, accusing Trump of selling American semiconductor chips that Beijing used to enhance its military power. A Harris victory would mean the continuation of the Biden administration’s targeted tech restrictions, which would pose more challenges for China’s tech supply chains, according to Daiwa.