Hong Kong stocks surge after Trump holds fire on retaliation

Via Financial Times

Shares in Hong Kong and mainland China jumped on Monday in their first day of trading after US President Donald Trump said he would revoke the Asian financial hub’s special trading status.

Hong Kong’s Hang Seng index rallied more than 3 per cent in early trading while China’s CSI 300 gauge of Shanghai- and Shenzhen-listed shares added 1.7 per cent, as investors deemed that Mr Trump had pulled his punches in a press conference on Friday.

Speaking after markets closed in Asia, Mr Trump said he would revoke special trade privileges for Hong Kong in retaliation for Beijing’s decision to impose a controversial security law on the former British colony.

Mike Pompeo, US secretary of state, had previously said Washington no longer considered Hong Kong as autonomous from China, raising questions over the impact on the territory’s role in international trade and financial services.

However, traders on Monday pointed to a lack of specific new measures in Mr Trump’s announcement, which stopped short of slapping more sanctions or trade restrictions on China.

Analysts also suggested that the early equities gains in Hong Kong could be linked to short-covering, as investors bought back shares previously loaned out as part of bearish trades.

The positivity in Chinese markets also came despite data over the weekend showing that manufacturing activity in May expanded at a slower rate than in April. That renewed concerns over the recovery in the world’s second-largest economy following the coronavirus outbreak.

Iris Pang, chief economist for Greater China at ING, said China’s recovery “should take a long time” due to weak global demand, noting lower export orders.

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Elsewhere across Asia, Japan’s Topix added 0.4 per cent on Monday morning while South Korea’s Kospi index rose 1.3 per cent. In Australia, the S&P/ASX 200 gained 0.7 per cent.

S&P 500 futures tipped the index to rise 0.1 per cent when Wall Street opens for trading later on Monday. The dollar index, which tracks the greenback against a basket of currencies, lost 0.4 per cent.

Oil prices slipped with Brent crude, the international benchmark, dropping 0.5 per cent to trade at $37.67 a barrel. WTI, the US marker, was little changed.