Amidst the ongoing turmoil in the Ukraine, the Chinese government has offered to assist in finding a diplomatic solution and negotiating a ceasefire. While this offer has yet to be taken-up, there are high hopes that the Chinese authorities will eventually be able to bring all parties to the negotiating table. Despite the uncertainty, this has not stopped investors gambling on a potential short to medium-term boost in trade between Beijing and Moscow.
Recent bilateral pledge
When President Putin visited Beijing for the Winter Olympics, the two countries held intense trade talks. There was a pledge to boost bilateral trade to $250 billion a year while at the same time announcing a $120 billion oil and gas deal. However, while some investors latched onto the potential for increased trade with Russia, sceptics pointed out that even if Russian trade doubled, it would still only account for 4% of China's annual total.
Against the current backdrop of ongoing western government led sanctions, it is essential to note that Chinese officials previously described potential trade with Russia as a "no limit" partnership. When the dispute in Ukraine finally comes to an end, it will be interesting to see how the land lies.
Trade concept stocks benefiting
In recent days there has been massive interest in relatively small trade-related industry stocks listed on the Chinese stock exchange. In what dealers described as "frenzied" trading, some companies have registered the maximum 10% stock price increase for six straight days. Since the conflict began, the price of some stocks has soared by 80% compared to a 3.5% fall in China's benchmark stock market index.
Despite some companies expressing concern about the considerable increase in their share price, retail investors continue to push prices higher. Against this backdrop, it is interesting to note that major Chinese companies haven't been dragged into this speculative bubble – so far. Does this suggest broader uncertainty about the short to medium-term trading relationship between China and Russia?
Trade execution services
As the Chinese authorities continue to open up domestic markets to international investors, there has been a significant increase in interest. Global Investment Strategy Hong Kong provides a range of investment services, from trade execution to settlement, safe custody to full market coverage and more.
Our lower latency high-tech trading platform is proving invaluable in these uncertain times with stock price volatility increasing. We also provide a dedicated trading desk open 24 hours a day, five days a week, to address client issues.
Summary
Many experts believe that the recent retail investor-led investment "frenzy", which has engulfed some specialist trade stocks, is wide of the mark. As the conflict enters its third week, there is still no clear path towards a resolution. However, it does throw an interesting light on the potential to increase Chinese/Russian trade in the short, medium and longer-term.