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Asian Markets: Hang Seng Touches 5-Month High in Otherwise Lackluster Trading Week

Hong Kong stocks closed at a five-month peak as investors cheered a rebound in China’s industrial profits for November. The benchmark Hang Seng index ended up at its highest closing level since July 26.
James Hyerczyk
Asian Stock Markets

The major Asia Pacific shares finished mostly higher last week, but gains were mixed due to the lack of fresh news over the U.S.-China trade deal, and low holiday trading volume. Traders remained optimistic about the trade agreement, but were still worried about the details in the pact, and when and where it would be signed.

For the week, Japan’s Nikkei 225 Index settled at 23837.72, up 21.09 or +0.09%. In South Korea, the KOSPI Index finished at 2204.21, up 0.03 or +0.00% and in Hong Kong, the Hang Seng Index closed at 28225.42, up 354.07 or 1.27%.

China’s Shanghai Index settled at 3005.04, up 0.10 or +0.00% and Australia’s S&P ASX 200 Index finished at 6821.70, up 5.40 or +0.08%.

Shanghai Composite Index Plunges then Recovers

Mainland Chinese stocks tumbled on Monday following the announcement that China will cut import tariffs on a wide range of goods. China’s finance ministry announced starting January 1, it will lower import tariffs on over 850 products ranging from frozen pork to some types of semiconductors.

“The move is not linked to U.S.-China trade tensions, instead it is seen as a combination of a need from China to lower costs on import necessities such as pork and medicine, while also aimed at showing a willingness to open its economy to the rest of the world,” Rodrigo Catril, senior foreign exchange strategist at National Australia Bank, wrote in a note.

Despite starting out weaker, the Shanghai Composite Index was able to recover from its losses to finish marginally higher.

US-China Trade:  Investors Optimistic, but Worried About Details

Market sentiment continued to be boosted last week by the mid-December announcement of Phase One of a U.S.-China trade deal. At the end of the week, the two economic powerhouses were in the midst of translating the deal, with the aim of signing it in early January.

In a regular press briefing on Thursday, the Chinese Commerce Ministry said China is in close touch with the U.S. on signing the initial trade pact. That came after U.S. President Donald Trump said Tuesday the deal is “getting done,” adding there will be a signing ceremony with Chinese leader Xi Jinping.

Kathy Lien, managing director of foreign exchange strategy at BK Asset Management, sounded a little optimistic about the deal in a note on Thursday saying, “China has been lukewarm about the trade agreement, expressing less enthusiasm than the US but (Thursday’s) comments is the strongest confirmation to date that there will be no reneging on the deal.”

Nonetheless there was still some pessimism in the air with Adams Asset Management’s Brock Silvers urging caution over the lack of details so far regarding the deal.

“It’s a bit strange that we have an agreement that everyone is trying to celebrate but no one wants to really tell me what’s in it,” Silvers, who is managing director at the firm, told CNBC’s “Squawk Box” on Friday. “I think the market can put up with that for a bit, we can be patient…but after next week…I think there will be some questions.”

Hang Seng Index Jumps to 5-Month High

Hong Kong stocks closed at a five-month peak as investors cheered a rebound in China’s industrial profits for November. The benchmark Hang Seng index ended up at its highest closing level since July 26.

Profits at industrial firms in November grew at the fastest pace in eight months, breaking a three-month losing streak, as production and sales quickened, but broad weakness in domestic demand remains a risk for earnings next year.

Another factor driving the markets was a Reuters report that said China had called on its biggest state firms to take a more active role in Hong Kong, including stepping up investment and asserting more control of companies in the financial hub.

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