Asian markets rally on fresh trade hope, elections lift Hong Kong

by AFP/ pic by BLOOMBERG

HONG KONG – Asian markets rose Monday on fresh optimism over the long-running China-US trade talks after Beijing offered an olive branch on the key issue of intellectual property, while Donald Trump hailed progress on the agreement.

Hong Kong stocks led the regional advance with pro-democracy parties on course for a landslide in local elections that could put pressure on the city’s government and Beijing to act after months of protests that have hobbled the financial hub’s economy and transport.

The week got off to a strong start after China said at the weekend it would hike penalties on violations of intellectual property rights while also look at reducing the thresholds for criminal punishments of those who steal IP.

The IP issue is a major sticking point for the United States in the discussions and agreement on it is seen as key to their success.

Trump on Friday told Fox News the deal was “potentially very close”.

Global markets have rallied in recent weeks on expectations the economic superpowers will sign a mini pact as the first part of a wider trade deal, though dealers are growing edgy at the lack of detail from either side.

There are also concerns about how tariffs will be wound back, with China insisting they are lifted as part of any agreement.

“Although long on promise, but short on detail, China’s move appears to be an attempt to mollify one of the US’s main reasons for initiating the trade war in the first place,” said OANDA senior market analyst Jeffrey Halley. “The hope being to get impetus back into the interim trade-talks.”

Sticking point

On Monday, Tokyo ended 0.8 percent higher, while Shanghai rallied 0.7 percent and Seoul piled on one percent. Singapore added 0.1 percent, Sydney climbed 0.3 percent and Mumbai jumped 0.9 percent. Wellington and Bangkok also rose but Taipei, Manila and Jakarta went backwards.

“The markets are pretty much priced for a deal to go ahead, and that may be the case, but we may see that pushed out to 2020,” Eleanor Creagh, market strategist at Saxo Capital Markets, told Bloomberg TV.

“We can see China make concessions on intellectual property… also on the currency and agricultural purchases. But the key sticking point is really going to be the rolling back of tariffs.”

Hong Kong was the standout performer, surging 1.6 percent as pro-democracy candidates headed for a huge win in community-level elections.

The results will send the Beijing-backed government a clear message of broad public support for the demands of a protest movement that has gripped the territory for months.

It will “be difficult for Beijing to ignore these results for fear of greater international condemnation in the court of public opinion”, said AxiTrader’s Stephen Innes. “The people have spoken, and now the ball is in Beijing’s court.”

Property firms, which have taken a battering as the sometimes violent demonstrations have dragged on, were among the best performers, while embattled transport network controller MTR Corp was also a big gainer.

Key figures around 0720 GMT

  • Tokyo – Nikkei 225: UP 0.8 percent at 23,292.81 (close)
  • Hong Kong – Hang Seng: UP 1.6 percent at 27,022.72
  • Shanghai – Composite: UP 0.7 percent at 2,906.17 (close)
  • Euro/dollar: UP at $1.1027 from $1.1024 at 2145 GMT
  • Pound/dollar: UP at $1.2854 from $1.2834
  • Euro/pound: DOWN at 85.78 pence from 85.87 pence
  • Dollar/yen: UP at 108.85 yen from 108.60 yen
  • West Texas Intermediate: UP 21 cents at $57.98 per barrel
  • Brent North Sea crude: UP 29 cents at $63.68 per barrel
  • New York – Dow: UP 0.4 percent at 27,875.62 (close)
  • London – FTSE 100: UP 1.2 percent at 7,326.81 (close)