Hong Kong stocks closed higher on Tuesday as investors continued to bet on easing US-China trade tensions.

The Hang Seng Index rose 0.7%, while the Hang Seng Tech Index climbed 1.3%.

In terms of star stocks, Bilibili up 9%; SMIC, CATL, Nio up 3%; Alibaba, Kuaishou up 2%; Tencent rose 0.5%; Xiaomi fell 1.4%.

Investors appeared willing to shrug off US President Donald Trump’s comment on Monday that he would impose a 155 per cent tariff on Chinese goods if trade negotiations between the two countries failed to reach an agreement. The threat came after tensions between the world’s two largest economies showed signs of easing over the weekend as Trump said he would meet Chinese President Xi Jinping later this month at the Asia-Pacific Economic Cooperation forum in South Korea.

「Sentiment in the Hong Kong stock market is still being shaped by expectations around China-US trade talks,」 said Kenny Ng Lai-yin, a strategist at Everbright Securities International.

Although there had been different signals – some more conciliatory and some more tense – there was still hope for progress, he added. 「After all, from a rational perspective, imposing an additional 100 per cent tariff would be quite unrealistic for the US and would have a significant negative impact,」 he said.

「With Trump, investors believe in ‘taco’,」 said Kenny Wen, head of investment strategy at KGI Asia. Short for 「Trump always chickens out」, the term refers to expectations among investors that Trump is likely to back down from tariff threats.

But the rally may still be limited. Down from a recent peak in early October, the Hang Seng Index was 「just recovering some of the losses,」 Wen said.

China on Monday reported mixed economic data, showing that the world’s second-largest economy still faces multiple challenges. Year-on-year growth in gross domestic product in the third quarter was slightly higher than expectations at 4.8 per cent, but was also the slowest pace this year. Household consumption continued to lose momentum in September, and new-home prices fell at the fastest rate in 11 months.

Without a meaningful recovery in the economy and a significant return of global capital to Hong Kong, which was largely dependent on macro fundamentals and policy, the upside for Chinese stocks remained limited, said Wang Qi, chief investment officer of UOB Kay Hian’s wealth management division in Hong Kong.

「We are yet to see these two things taking effect, not to mention the rising US-China tensions,」 Wang added. 「The Hang Seng Index may be capped at 26,000 by the lack of real progress in these two factors.」