SHANGHAI: China and Hong Kong stocks hit one-month highs on Tuesday as expectations for a China-US trade deal outweighed worries from a downbeat China service activity survey.
Technology shares led the gains as investors returning from holiday breaks were inspired by bullish Asian currencies that suggested a shift away from dollar assets.
Both China’s blue-chip CSI300 index and the Shanghai Composite Index climbed more than 1% in their best day in almost a month.
Hong Kong’s benchmark Hang Seng gained 0.7% to a one-month high.
A private sector survey showed on Tuesday that China’s services activity expanded at the slowest pace in seven months in April amid uncertainty caused by higher US tariffs.
However, investors chose to focus on a possible de-escalation in trade tensions after President Donald Trump said on Sunday that the US was meeting with many countries, including China, on trade deals.
Strong local currencies also lifted the mood. The yuan jumped to a 1-1/2-month high, while the Hong Kong dollar hit the ceiling of its band again on Tuesday, triggering intervention by the city’s central bank.
Their surge mirrors moves in other Asian currencies amid a broader selloff in the US dollar.
“The US financial system is still on the edge of a crisis,” Chinese brokerage Western Securities said in its mid-year strategy report, advising investors to shift away from dollar assets into “safe assets” including gold as well as Chinese banking and tech stocks. China’s tech-heavy STAR 50 Index rose 1.4% while the Beijing Stock Exchange 50 Index jumped 3%.
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