Hong Kong and China Fuel Global Rally with Optimism

You can buy the whole seat, but you’ll only need the edge these days.

A day after markets plunged on trade war fears, the Dow Jones is up more than 200 points thanks to Hong Kong and China.  

For one, Hong Kong leader Carrie Lam just announced the withdrawal of the extradition bill, which had sparked nearly three months of protests.  

“The government will formally withdraw the bill in order to fully allay public concerns. The Secretary for Security will move a motion according to the Rules of Procedure when the Legislative Council resumes,” she said as quoted by CNBC.

Other demands included retracting the movement as a “riot,” having all charges dropped against anti-extradition protesters, setting up an independent committee to investigating the use of force by Hong Kong police, and universal suffrage in elections for the city’s CEO and legislature.

As a result of the news, nearly every asset on the Hang Seng index was up.  

In fact, some of the biggest gainers on the day included property developers, which were beaten up by the protests and worsening trade war.  According to CNN, stocks including Wharf Real Estate, New World Development and Sun Hung Kai Properties were all big winners on the day.

China Taking Steps to Strengthen Its Economy

Also fueling global optimism is news that the People’s Republic of China will implement cuts in the reserve requirement ratio for Chinese banks, as reported by Reuters.  It’s expected to boost the country’s growth, and signals its willingness to combat the impact of the trade war.  

“(We) will use both broad and targeted RRR cuts in a timely manner as tools to guide financial institutions to guide more funds into inclusive finance, and ramp up support for the real economy,” they noted, as also quoted by Reuters.

However, we must also be mindful that there are no near-term solutions for the trade war.  Until that happens, investors should remain cautious.