China stocks, yuan gain as investors cheer Year of the Horse, US tariff ruling

SHANGHAI, Feb 24 (Reuters) - China stocks galloped over 1% into the Year of the Horse on Tuesday while the yuan rose to a near three-year high, as traders returning from a nine-day holiday bet a U.S. tariffs reset will benefit the world's second-biggest economy.

Hong Kong stocks, however, gave up much of Monday's 2.5% gains, after Wall Street skidded overnight.

While the U.S. Supreme Court's annulment of President Donald Trump's "reciprocal" tariffs and Trump's subsequent move to impose a temporary 15% global tariff have thrown world trade into a new bout of confusion, investors say the latest developments will likely benefit China.

"I see it as positive to China," said Wang Zhuo, partner of Shanghai Zhuozhu Investment Management.

It could lead to lower tax on Chinese goods, and also "represents a check on Trump's tariff abuse," he said, adding China's onshore stocks are less vulnerable to U.S. market volatility.

China's blue-chip CSI300 Index .CSI300 rose 1.3% by the lunch break, while the Shanghai Composite Index .SSEC advanced 1.2%.

Hong Kong's Hang Seng Index .HSI fell 2% following Monday's 2.5% jump.

China's Lunar New Year holiday began on February 15, to celebrate the start of the Year of the Horse. Markets resumed trading on Tuesday.

LOWER TARIFFS ON CHINA

Chinese investors bought into export-related stocks as analysts expect the U.S. tariffs rejig will lead to lower rates for China, and could weaken Trump's hand in trade talks with Beijing.

The CSI Consumer Electronics Index .CSI399811 jumped 2.4% while an index tracking machinery stocks .CSI000812 gained 2%.

"Generally speaking, tariff on China will come down," Deng Lijun, strategist at Huajin Securities said in a roadshow.

Appetite for risk has also been improving amid easing Sino-U.S. tensions and ahead of the upcoming Chinese parliamentary meeting in early March, he said.

Goldman Sachs predicts a net reduction of around 5 percentage point in U.S. tariffs on Chinese goods as a result of the tariff reset.

Analysts at Morgan Stanley and JPMorgan expect tariff rates on China to decline to 24% and 27%, respectively, from 32% earlier.

In the currency market, the onshore yuan CNY=CFXS hit its strongest level against the dollar since May 2023 on Tuesday, changing hands at 6.8963 per dollar around midday.

Analysts expect lower U.S. tariffs to bolster already-strong Chinese exports, underpinning the Chinese currency.