China, HK stocks gain on trade deal hopes, local currency strength

SHANGHAI: China and Hong Kong stock benchmarks rose almost 1% on Tuesday, as expectations for a China-US trade deal outweighed worries from a downbeat China service activity survey.

China stocks end mixed as factory slump persists

• Technology shares led the gains as investors returning from holiday breaks were inspired by bullish Asian currencies that suggest a shift away from dollar assets.

• Both China’s blue-chip CSI300 Index and the Shanghai Composite Index climbed nearly 1% by the lunch break, on track for their best day in almost a month.

• Hong Kong’s benchmark Hang Seng gained 0.6% 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.

• The mood was also lifted by strong local currencies as 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 nearly 3%.

• Shares in high-tech sectors including software development, cloud computing and big data also rose sharply.

• Meanwhile, an index tracking China’s rare earth industry jumped more than 4% on bets the sector will be a key lever in China’s geopolitical tussle with the United States.

• In Hong Kong, financial, tourism and shipping stocks were among the biggest gainers.