China, Hong Kong stocks join global relief rally on hopes of end to Iran war

SHANGHAI, April 1 (Reuters) - China and Hong Kong stocks joined a global relief rally on Wednesday, and the yuan firmed against the dollar after U.S. President Donald Trump signalled an end to the Iran war that had roiled markets.

Trump said the United States could end its military attacks on Iran within two to three weeks and Tehran did not have to make a deal as a prerequisite for the conflict to wind down.

"The Iran war will wrap up quickly," said Zeng Wenkai, chief investment officer at Hong Kong-based Shengqi Asset Management.

"The U.S. and Iran won't need to strike a deal. U.S. troops will pull out, Iran won't really have a choice and won't block the strait, and global stocks will jump."

However, he expects China stocks to bounce less forcefully than other markets that had been pounded harder by the oil shock.

China's blue-chip CSI300 Index .CSI300 rebounded 1.4% by the lunch break, heading for its best day in seven weeks. The Shanghai Composite Index .SSEC also gained 1.4%.

In Hong Kong, the Hang Seng rebounded 2%, as Asian markets .MIAPJ0000PUS rallied nearly 4% following an overnight jump on Wall Street .DJI.

China's yuan firmed to its strongest level in a week against the dollar, trading around 6.8850 at noon on Wednesday, as optimism toward war de-escalation reduced the greenback's appeal.

China's long-term bond yields remained stable CN10YT=RR, despite volatility in global debt markets.

"As the world's manufacturing powerhouse, China can provide a sense of stability to the world", said Zhang Di, economist at China Galaxy Securities.

China would be relatively unscathed from any oil shock as it is a coal-rich country, has a dominant position in new energy, and has rich oil reserves, Zhang said.

But he said "the U.S. is sitting on a tiger and will find it difficult to get off," risking being drawn into a prolonged war or losing international credibility.

China stocks have lost roughly 4% since U.S. and Israel struck Iran on February 28, less than the 10% slump in Asian equities, and a 6% tumble in world stocks.

China's drugmakers .CSI931440, chipmakers .STARCHIP and tourism stocks .STARCHIP jumped sharply on Wednesday.

In Hong Kong, biotech firms .HSIDI, shipping companies .HSSH and materials stocks .HSCIM led the gains.