Asian markets rose on Wednesday, led by a surge in Hong Kong after reports said the city’s leader was considering agreeing to a key demand of pro-democracy protesters, fuelling hopes for an end to months of damaging protests in the financial hub.
Shares rallied across the board on the Hang Seng Index after the reports, with property and retail firms among the best performers, having taken a hiding over the past few weeks as the demonstrations were increasingly dogged by violence.
Chief Executive Carrie Lam and Beijing have so far refused to make any concessions to the protesters beyond agreeing to suspend a loathed extradition bill, a move that fell far short of demands to permanently shelve it.
But one pro-establishment lawmaker who asked to remain anonymous said their camp was being summoned to meet Lam on Wednesday afternoon ahead of an expected major announcement.
Multiple news organisations later said Lam would announce a full withdrawal of the bill later in the afternoon.
“The withdrawal is a sign of an inflection point in the 13-week-long crisis,” said Justin Tang, head of Asian research at United First Partners. “Retail and property stock investors are signalling their optimism and putting their money where it matters.”
Hong Kong – which has lost more than a tenth of its value over the past three months, partly because of the protests – soared to close at 3.9 per cent, while Shanghai ended 0.9 per cent higher.
“It could be that this is Beijing’s way of shifting the blame and eventually sees . . . [Hong Kong leader Carrie Lam] replaced in the not too distant future,” Michael Hewson, chief market analyst at CMC Markets UK, wrote in a note.
Most other Asian equity markets also rose after two days of stuttering, with dealers brushing off the latest China outburst from US President Donald Trump.
Trump threatened China that if it did not move quicker in negotiations it would get a worse trade deal from him if he won the 2020 election.
The tweet came as reports said the two sides were struggling to agree parameters for the next round of talks, which Trump had said would go ahead this month.
Pound builds on recovery
Beijing’s point man in the talks, Vice Premier Liu He, met two Republican senators, Steve Daines and David Perdue, on Tuesday in the Chinese capital and said he wanted a negotiated resolution based on “equality and mutual respect”, state-run Xinhua News Agency reported.
On other markets, Tokyo ended 0.1 per cent higher, Singapore added 1.4 per cent, Seoul climbed 1.4 per cent and Taipei added 0.9 per cent. Manila, Wellington, Mumbai and Bangkok also posted strong gains. The Cambodia Stock Exchange index ended 0.94 per cent higher.
The optimism in Hong Kong spilt over into early European trade as well, analysts said, with London rising 0.7 per cent, Paris up 1.3 per cent and Frankfurt putting on 1.3 per cent.
The broad gains also came despite a shock drop in US factory activity into contraction – the first time since Trump came to power and raising concerns about the state of the world’s top economy.
The figures come days before the release of the closely watched jobs data on Friday, which is pored over for an idea about the US Federal Reserve’s plans for monetary policy with observers tipping it to cut interest rates again at some point.
The pound continued its recovery from Tuesday’s plunge, with Britain preparing for another general election.
After a day of drama in Westminster, opposition and rebel lawmakers voted to take control of parliamentary business, allowing them to push through a bill preventing a no-deal Brexit.
The move was a blow for new Prime Minister Boris Johnson, with several members of his own Conservative party voting against him and defying a warning of a snap poll in mid-October.
Sterling at one point plunged to $1.1959 on Tuesday – its weakest level since 1985 except for a 2016 “flash crash” – but rebounded as traders bet Johnson’s loss would take a no-deal divorce off the table. Most economists say such a scenario would hammer the British economy.
Still, the development means more uncertainty for the country.
Wednesday’s “session of parliament promises more viewing pleasure, with the possibility that the UK will be heading to the polls . . . one of the many possible permutations”, said Jeffrey Halley, senior market analyst for Asia-Pacific at Oanda.