"The results far exceeded expectations!" Multiple public fund managers are optimistic about the China-U.S. economic and trade talks, with the latest stock and bond market analysis now available.

"The joint statement significantly exceeded expectations! Both sides demonstrated a more pragmatic attitude, which will influence the market's judgment on the overall global economic and trade conflicts." On May 12, the Ministry of Commerce released the joint statement on the China-US economic and trade talks in Geneva, and a foreign investment banker shared his assessment immediately.

The results of the "Joint Statement on the China-US Economic and Trade Talks in Geneva" released by China and the US show that:

The US has reduced the additional tariffs of up to 125% imposed on China since April 2, retaining only a 10% tariff increase, with the remaining 24% tariff increase suspended for the initial 90-day period;

In response, China has reduced the additional tariffs of up to 125% imposed on the US since April 4, also retaining only a 10% tariff increase, with the remaining 24% tariff increase suspended for the initial 90-day period.

The magnitude of tariff adjustments in the first round of negotiations significantly exceeded market expectations, which is also the strongest consensus in the market. The joint statement was released after the A-share market closed, leading to significant fluctuations in major asset classes, with both stocks and foreign exchange markets rallying, while the bond market experienced a temporary setback.

From the perspective of the stock market, the Hong Kong stock market surged rapidly, with the Hang Seng Index/Hang Seng Tech Index closing up 3.0%/5.2% respectively. The FTSE China A50 Index futures and MSCI China A50 Connect Index futures both rose by over 2%. The three major US stock index futures also rallied sharply, with the S&P 500 and Nasdaq 100 index futures rising by about 3%, and the Dow Jones futures rising by over 2%.

From the perspective of the foreign exchange market, the offshore RMB strengthened by over 100 basis points against the US dollar in the short term, breaking through the 7.2 mark.

From the perspective of safe-haven assets such as bonds and gold, the decline in Treasury futures widened, with the 30-year Treasury futures falling by over 1.3% and the 10-year Treasury futures slightly declining by 0.5%. COMEX gold fell sharply, with a decline of over 3.6% at one point.

The joint statement has sparked a huge response. What are the next highlights? How will it affect the allocation of major asset classes in the market? Several public fund companies provided interpretations immediately.

"Rare Consensus on Tone", Multiple Foreign-Invested Public Funds Bullish on Improved Risk Appetite in Equity Markets

As early as the morning of May 12 before the market opened, news emerged that substantial progress had been made in the high-level economic and trade talks between China and the US. Song Yu, Chief China Economist at BlackRock, stated that the rare consensus on tone demonstrated by both China and the US reflects a high level of agreement between the two sides. Progress in China-US relations and increased support from domestic economic policies are important reasons for the recent improvement in the macroeconomic situation. It is expected that despite significant progress in China-US relations, economic policies will continue to be intensified to maintain the positive momentum achieved since the beginning of the year. This series of changes should alter the confidence of domestic and overseas investors in Chinese assets, benefiting the Chinese market.

Following the release of the "China-US Joint Statement on Geneva Economic and Trade Talks" by China and the US after the afternoon market close, J.P. Morgan Asset Management summarized that the key points and impacts of this joint statement include the following:

1. The statement effectively cooled down the earlier trade disputes between China and the US, with both sides making certain concessions by reducing and suspending some of the previously imposed tariffs. This not only created a friendly environment for subsequent negotiations but also ended the earlier suspension of China-US trade due to excessively high tariffs, facilitating the orderly resumption of economic and trade activities between the two sides.

2. Both sides agreed to establish a regularized dialogue mechanism, which will facilitate timely communication, resolve differences, avoid unnecessary frictions, and enhance the stability of future negotiations.

3. The positive start to trade talks between China and the US, two major economies, will help alleviate concerns about global supply chain disruptions and economic recession.

"The extent of tariff reductions this time exceeded expectations, reflecting that both China and the US recognize the economic reality that tariffs will hit global growth, and that dialogue and negotiation are better choices for mitigating risks," J.P. Morgan Asset Management said. The capital markets responded positively immediately, with major Hong Kong stock indices and US stock index futures rising in response, along with increases in US Treasury yields and the US dollar index. The 90-day tariff suspension period has bought both sides time to reach further consensus, but it still brings certain pressure to the negotiation process, and the progress of subsequent consultations between the two sides needs to be observed. It is expected that the overall risk sentiment in the capital markets may ease somewhat, and after the risk release and rebound, the markets may return more to economic and earnings fundamentals.

Morgan Stanley Funds also expressed that the outcome of the talks far exceeded expectations.

"Since the tariff hikes by both sides, there has been limited contact. From the initial statement last week to the current talks, the progress has been rapid, indicating that the current high tariffs are a lose-lose situation, and tariff reductions are in the interests of both China and the US," Morgan Stanley Funds further pointed out. For the market, we believe that the outcome of the talks will significantly enhance investors' risk appetite. If the future US tariff rates on China can be maintained at the reduced levels, the pressure on China's exports will significantly decrease, and expectations for the macroeconomic fundamentals will also be somewhat repaired. Therefore, subsequent market opportunities may further increase.

How Will This Impact A-Shares and Hong Kong Stocks? Institutions Express "Optimism"

Looking ahead, the unexpected adjustment of China-US tariff policies sends a positive signal, and many fund companies have expressed optimism about the market.

Invesco Great Wall Fund pointed out that the extent of tariff reductions in this round of China-US negotiations far exceeded market expectations, possibly due to the US supply chain's reliance on China and the enhancement of China's comprehensive national strength, which will help boost short-term market risk appetite.After tariffs return to an acceptable level, the recovery of the domestic economy and corporate earnings is expected to return to normal, with fundamentals anticipated to improve. In the short term, it cannot be ruled out that some funds will take profits. However, both earnings and valuations are currently in a relatively favorable state. Going forward, attention needs to be paid to changes in tariff policies after the 90-day exemption period.

In the medium term, the Chinese market boasts advantages such as strong policy support and a well-established institutional framework. Since the beginning of the year, there have been favorable developments in both technology and geopolitical narratives. Meanwhile, from a valuation perspective, the current valuation levels of major A-share indices are highly attractive in both horizontal and vertical comparisons. Combined with the expectation that economic fundamentals and corporate earnings will enter a cycle of improvement and recovery, we remain optimistic about the medium-term performance of the A-share market.

At the allocation level, many fund companies have mentioned that in the short term, enterprises in the export and "go global" chains will directly benefit.

Morgan Stanley Funds stated that export chains previously impacted by tariffs are expected to recover, with a concentration in the midstream manufacturing sector.

Invesco Great Wall Fund further pointed out that in the short term, enterprises in the export and "go global" chains will directly benefit, and related sectors are expected to have relatively strong performance in stages. It is recommended to pay attention to export chain industries such as consumer electronics, components, machinery, and auto parts. The significant improvement in Sino-US trade negotiations has notably enhanced investors' risk appetite, and the dividend style may exhibit mediocre performance in the short term. In the medium term, after the impact of tariffs diminishes, attention can be focused on sectors experiencing a rebound in prosperity. Among them, the breakthrough by DeepSeek accelerates the development of the AI industry, with infrastructure and application segments within the AI industry chain remaining important medium-term investment themes.

Ping An Funds also holds a positive view on the technology sector, believing that this unexpected joint statement can not only alleviate the economic tail risks brought about by global trade issues but also boost the previously sluggish sentiment of global risky assets in the short term. Therefore, for A-shares and Hong Kong stocks, growth stocks, which are more sensitive to the denominator, may benefit more in the short term. It is recommended to actively pay attention to sectors such as TMT, robotics, pharmaceuticals in A-shares, and the Hang Seng Tech Index in Hong Kong stocks.

Bond market under short-term pressure, with appropriate attention to swing trading

In the bond market, tariff negotiations significantly exceeded market expectations, causing bond prices to fall. The 10-year government bond yield rose by 5.55 basis points to 1.6775%, while the 30-year government bond yield increased by 6.15 basis points.

Regarding the reasons, Invesco Great Wall Fund stated that the bond market, considering that tariff easing may enhance risk appetite and weaken the impact on fundamentals, anticipates that the next round of monetary easing may be more delayed, and has responded accordingly.

Regarding the subsequent outlook for the bond market, Invesco Great Wall believes that bond market risks in May may be relatively controllable. With monetary policy returning to normalization, medium- and short-term bonds offer higher certainty after adjustments, while the long end may be more volatile. Appropriate attention can be paid to swing trading.

Although there may be short-term pressures, institutions should not overlook the bond market. Another fund company stated that in the short term, with the improvement of economic growth expectations, an increase in risk appetite, and adjustments to expectations for monetary easing, there is a certain degree of adjustment pressure in the bond market. However, considering that the 7-day reverse repo rate was lowered by 10 basis points last week, the probability of the 10-year Treasury bond yield returning to 1.8% is relatively small. Therefore, it may be advisable to consider strategic positioning amidst these adjustments.

The rationale for this judgment is that, looking ahead, as substantive progress is made in Sino-US economic and trade negotiations, bond market investors' expectations will be revised. Firstly, expectations for an economic downturn will be corrected, as the economy may perform better than previously anticipated, and the deterioration of the external trade environment may be limited. Secondly, expectations for monetary easing will decline in phases. Last week, at a press conference held by the State Council Information Office, it was announced that RRR cuts and interest rate cuts would be implemented. The market believes that as the pressure on the economic fundamentals gradually increases, there will be further opportunities for RRR cuts and interest rate cuts in the future. However, currently, the necessity for RRR cuts and interest rate cuts in the short term is decreasing.