After a string of headaches, some positive buzz appears to be brewing for China's economy.
The growing likelihood of even a limited trade deal with the United States combined with a ramp-up in Chinese stimulus are jointly making some experts more optimistic about the 2019 prospects for the world's second-largest economy.
The escalating trade war was a dominant narrative in 2018 and has seemed to hit both countries' economies and financial markets, with China largely seen as having taken the bigger blow.
The atmosphere, however, has changed after a 90-day truce began early in December. Negotiations in Beijing earlier this month were mutually hailed and more talks are in store. And the U.S. is reportedly even considering lifting tariffs to reach a deal. That is all helping create a positive atmosphere for some kind of agreement.
"The point is that both sides are now under a lot of pressure to get a deal done," Stefan Hofer, chief investment strategist at LGT Bank in Hong Kong, told reporters on Tuesday, calling it "just something that has to happen."
LGT's base forecast is for a deal by the middle of 2019, but Hofer said now is the time to get into Chinese markets.
"I think it's perfectly okay for investors to take on China exposure now in anticipation of that," he said.
Political risk consultancy Eurasia Group said in a Thursday note it sees "increasing signs of momentum towards some type of interim deal" within this year. In its view, that'll be driven mostly by U.S. President Donald Trump's wish to calm markets and have a win to take into next year's expected re-election bid.
That doesn't mean, however, that the issue will be solved.
"The two sides have made only slight progress on the core structural issues at the heart of the trade dispute," Eurasia Group cautioned.
Still, experts say reduced tensions and no increase in existing tariffs would mark a significant breakthrough. And that, combined with Chinese measures to support the economy point to a better outlook.
