Hong Kong equities jump as investors shrug off tensions between the United States and China

Hong Kong Hang Seng Index (HSI) rose by more than 3.3% in morning trade. It was the first opportunity investors had to react to last week’s US President Donald Trump’s announcement that Washington would “begin the process of eliminating political exemptions that give Hong Kong different and special treatment” from mainland China.

Trump’s response marked an escalation of tensions between the United States and China: the president blew up Beijing for passing a national security law that fundamentally undermines Hong Kong’s autonomy.

Experts pointed out, however, that Trump’s action will likely have a limited immediate impact due to Hong Kong does not export many goods in the United States.

“Reopening optimism reigns supreme,” wrote Innes.

New data from China indicate that factories are starting to recover from the pandemic.

Manufacturing activity in the country grew unexpectedly last month, according to a carefully followed private survey. Media group Caixin said on Monday that the Chinese manufacturing purchasing managers index rose to 50.7 in May, compared to 49.4 in April. It also beat the 49.6 from which analysts polled Refinitiv had expected. A number above the 50 point level indicates growth.

“Manufacturing production recovered faster than demand as the domestic economy recovered from the epidemic,” Caixin Insight Group senior economist Wang Zhe wrote in a statement accompanying Caixin’s data. Wang added, however, that exports remain sluggish as the rest of the world continues to face the virus.

Over the weekend, the Chinese government too he reported that his official manufacturing PMI grew in May. The official non-manufacturing PMI survey, which measures the service sector, also indicated expansion – another suggestion that domestic economic activity is recovering, according to Jeffrey Halley, senior market analyst for Asia Pacific at Oanda.

South Korea and Taiwan, however, saw manufacturing production decline in May. And while production in the Philippines, Vietnam, Malaysia and Thailand has improved with the slowdown of the blocs, SMEs for those Southeast Asian countries have still indicated a contraction rather than growth, according to Alex Holmes, Capital’s Asian economist Economics.

“The big picture remains the same: the region’s manufacturing sector is in deep recession,” Holmes wrote in a statement on Monday. “Production is likely to remain well below normal levels for many months to come, as domestic and global demand remains very depressed.”