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 that an end to the Iran war could be in sight.

Trump said the U.S. could end its military attacks on Iran within two to three weeks and Tehran does 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 expected China stocks to rise less forcefully than other markets, which have been hurt more severely by the oil shock.

China's blue-chip CSI300 Index .CSI300 rebounded 1.7% in its best day in almost three months. The Shanghai Composite Index .SSEC gained 1.5%.

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

China's yuan firmed to its strongest level in two weeks against the dollar, trading at 6.8725 in the late afternoon, as optimism about a 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, an economist at China Galaxy Securities.

China would be relatively unscathed from an oil shock as it is a coal-rich country, has a dominant position in new energy and has ample 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 the U.S. and Israel struck Iran on February 28, compared with a 10% slump in Asian equities and a 6% tumble in world stocks.

China's drugmakers .CSI931440, chipmakers .STARCHIP and tourism stocks .CSI930633 jumped sharply on Wednesday.

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