There is a 10 percent chance that the US and China will reach an agreement to end their trade dispute by the end of March and the two sides would likely extend their talks, but might hold off on imposing any new tariffs, which would ease investors’ jitters, BNP Paribas SA said yesterday.
The French banking group also lowered the odds — from 30 to 20 percent — of the trade talks failing and the US increasing its tariffs to 25 percent on US$200 billion of Chinese goods, as the negotiations appear to have become smoother, BNP senior greater China economist Lo Chi (羅念慈) told a news conference in Taipei.
The trade talks between Washington and Beijing might continue for a long time, but optimism about the outcome would help boost global equities, BNP Asia chief investment officer Prashant Bhayani said.
However, investors should still keep an eye on the negotiations, as political issues can arise at any time, Bhayani added.
Global growth is expected to slow this year, as economies face challenges such as US monetary tightening, technology cycle corrections, a slowdown in China and political uncertainties, the bank said.
The bank forecast global growth would slow to 3.4 percent this year from 3.7 percent last year.
US growth would be curbed by a fading fiscal stimulus and could decline to 2.1 percent, from 2.9 percent last year, but would still be historically high, Bhayani said.
The bank forecast China’s GDP growth would slow to 6.2 percent, from 6.6 percent last year, in line with World Bank predictions.
Some emerging markets could still grow fast this year, such as India, Brazil and Indonesia, BNP said.
With regard to the local equity market, BNP said that some firms’ valuations are favorably low, but it still expects the market to experience volatility this year due to corrections in the smartphone segment, Bhayani said.
Taiwan might benefit from the escalating trade dispute, being regarded as the best location to move supply chains to from China after Southeast Asian nations, a survey conducted by the bank showed.
Standard Chartered Bank yesterday echoed BNP Paribas’ predictions, saying that the US and China could barely reach agreements on structural issues like intellectual property protection.
Therefore, investors should prepare for the dispute to last a long time, Standard Chartered said.
The bank forecast China’s GDP growth would reach 6.4 percent this year, higher than the market consensus of 6.2 percent, saying that Beijing would launch more fiscal and monetary stimuli, Standard Chartered Greater China and North Asia chief economist Ding Shuang (丁爽) told a news conference.
The US dollar-yuan exchange rate would not break the 7 yuan level, Ding added.
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