China Stocks Rally Following First US Presidential Debate

The SPDR S&P 500 ETF Trust SPY rallied more than 1.3% on Wednesday, while the iShares China Large-Cap ETF FXI gained 1.7%. The strong performance from Chinese stocks may be due in part to the latest round of strong economic data from China, and it may also be driven by Joe Biden’s performance in Tuesday night’s presidential debate.

The Data: On Wednesday, China’s National Bureau of Statistics reported the nation’s official manufacturing purchase managers index climbed to 51.5 in September beating consensus estimates of 51.2. In addition, China’s official nonmanufacturing PMI which includes its lagging service sector, climbed to 55.9 in September, its highest level since November 2013.

Debate Impact: While the economic numbers out of China are certainly good news for China investors, Chinese stocks may also be getting a boost from the first U.S. presidential debate of 2020. President Donald Trump has made his trade war with China a centerpiece of his first term in office, and a Biden victory in November could help ease geopolitical tensions between the world’s two latest economies.

In a heated debate on Tuesday, Trump once again blamed China for the global pandemic, calling COVID-19 the “China plague.” Biden has previously said he would eliminate tariffs on Chinese imports and work with international bodies such as the World Trade organization to apply economic pressure to China when need be.

“The most effective way to meet that challenge is to build a united front of U.S. allies and partners to confront China’s abusive behaviors and human rights violations, even as we seek to cooperate with Beijing on issues where our interests converge,” Biden wrote earlier this year.

Benzinga’s Take: European sportsbook Betfair reported a 7.3% boost in Biden’s odds of winning the election following last night’s debate and now have Biden’s chances of victory at 61.7%.

While strong polling numbers and debate performance from Biden leading up to the election could be good news for Chinese stocks, investors should remember that a messy, contested election result could potentially have a severe negative impact on global financial markets in the near-term.

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