Stock markets around the Asia Pacific region started a week on a positive note. Despite the ongoing tensions between Hong Kong and China, the Hang Seng index was able to surge 3.36% on its trading day.
U.S. President Donald Trump also announced last Friday that he would vow to eliminate special treatment for Hong Kong amid China’s approval of a controversial national security bill.
In addition, investors focused on the data released over the weekend by China’s National Bureau of Statistics showing factory activity in May was expanding.
In a recent Reuters report, the official manufacturing Purchasing Manager’s Index (PMI) slightly dropped to 50.6 in May from 50.8 in April.
However, the PMI still remained above the 50-point mark indicating that China’s factory activity is still in the state of expansion. Analysts expected this to rise to 51.0.
Recently, the Chinese government dismissed its Gross Domestic Product (GDP) growth target for 2020 in its yearly work report due to the uncertainties brought about by the coronavirus pandemic.
It is important to note that Hong Kong is also one of the U.S. major trade partners and removing its special status could be costly.
In a report from CNBC, Clete Willems, a former White House trade negotiator, has claimed that tariffs won’t be the most pressing concern if the U.S. will push through with revoking its trade status with the Asian state.
The impact of its revocation is that more than 1,300 American companies operating in Hong Kong will be greatly affected as he questions the next motives moving forward:
“What’s really significant is going to be export controls — do we stop U.S. technology from going to Hong Kong without a license? Do we have different tech treaties, aviation treaties with Hong Kong?”
Aside from Willems’ concern over Hong Kong’s role as a financial hub, research firm Capital Economics last week mentioned that the sale of U.S. technology to Hong Kong could add more restrictions.
As a result, restricting the ability of Hong Kong-based firms to source “sensitive products” would take away its advantage as a business location versus mainland China.
Investors around Asia are currently watching developments in Hong Kong and China as the markets kick-off the month of June. Wall Street may also play a role in the world’s ongoing developments.
Featured Image courtesy of johnlsl/Flickr
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