AFP /Hong Kong
Hong Kong stocks rallied yesterday, leading many Asian markets higher after last week’s losses, with investors cheering a decision by the city to suspend plans to push through a controversial extradition law.
Investors are also moving cautiously ahead of two huge market-moving events: the Federal Reserve policy meeting this week with its plans for interest rates in focus, and the G20 summit next week where US President Donald Trump and his Chinese counterpart Xi Jinping are due to hold trade talks.
Investors returned to buying in Hong Kong after three days of losses that saw the Hang Seng drop more than 2% after protests against the law — which would have allowed extradition to China — turned violent on Wednesday.
Another, peaceful, demonstration on Sunday saw around 2mn people take to the streets, according to organisers. The plan had also spooked business leaders who feared it would damage the city’s reputation as an international business hub.
Traders “will breathe a loud sigh of relief today, as on Wednesday when tear gas and rubber bullets were filling the air, the markets were getting extremely jittery that this ticking time bomb was about to explode”, said Stephen Innes, managing partner at Vanguard Markets.
The Hang Seng closed up 0.45%, while Shanghai gained 0.2% and Tokyo’s Nikkei ended up 0.03%. Elsewhere, Jakarta, Seoul and Taipei all ended the day in the red.
Traders are now awaiting the conclusion of the Fed’s policy meeting on Wednesday, with hopes it will provide some forward guidance on rates, even if it is not expected to announce a cut just yet.
Most observers are tipping a reduction next month as the US economy shows signs of stuttering.
“A lot is riding on this week’s (meeting) as the anticipation of Fed easing has single-handedly buttressed global equity markets even as trade war escalation looms ominously,” Innes added.
But there was a warning that investors could sell up if the central bank comes up short in its post-meeting statement.
“A less than full dovish undertone from the Fed could stop a rally in equities and reverse some gains as there is heavy anticipation of a rate cut sooner rather than later,” said OANDA senior market analyst Alfonso Esparza.
Once that is out of the way, attention turns to next week’s flagged meeting between Trump and Xi on the sidelines of the G20 in Osaka, where they will discuss their long-running trade war. Dealers are hoping for some movement in Japan after Trump shocked markets last month by ramping up tariffs on Chinese imports despite the two sides appearing to be closing in on a deal.
However, optimism is at a premium after US officials played down the chances of an agreement between the two leaders.
In Tokyo, the Nikkei 225 closed up 0.03% to 21,124.00 points; Hong Kong — Hang Seng ended up 0.45% to 27,240.35 points and Shanghai — Composite closed up 0.20% to 2,887.62 points yesterday.
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