Asian stocks gained on Tuesday, with encouraging Chinese PMI data eclipsing concerns over a second coronavirus wave and the passage of Hong Kong’s controversial national security proposals into law.
Rising more than 0.5 per cent, one of the region’s widest-ranging indices, MSCI’s Asia Pacific ex Japan, continued its run to enjoy the largest quarterly gain in over a decade. Japan’s Nikkei 225 itself closed up 1.33 per cent.
Like the United States and to an extent the European Union, China resorted to major stimulus injections in order to boost its post-Covid recovery.
Both of the Chinese Government’s Purchasing Managers' Indices beat expectations, with Manufacturing PMI rising from 50.6 in May to 50.9 and Services PMI rising from 53.6 to 54.4.
While news that the second-largest economy in the world is on the road to recovery buoyed market sentiment on Tuesday, some have voiced their concern over a seeming divergence between demand and supply. Although activity and output growth resumed, exports and domestic retail sales actually shrank. Indeed, manufacturing employment fell in June, contracting to 49.1.
Representing a more long-term point of global concern, on Tuesday President Xi Jinping signed The National Security Law for Hong Kong into law after China’s senior legislative unanimously approved it.
The mass protest movements of 2019 in Hong Kong led to the controversial national security measures. Although largely peaceful, the pro-democracy demonstrations plunged the financial hub into a recession and triggered a moderate degree of capital flight.
Beijing has consistently claimed that the new law will guarantee stability in Hong Kong and prevent subversion, terrorism and “foreign forces” from meddling in the semi-autonomous region.
Western nations on the other hand have voiced their concerns that the measures will only quash pro-democracy elements within the former British colony and jeopardise the civil liberties guaranteed by the “One country, two systems” model agreed in 1997.
US President Donald Trump recently warned that he would rescind Hong Kong’s preferential trade status should the law be passed. Such threats have rung hollow, at least in the immediate term, following the passage of the measures. By the close of Tuesday trading the Hang Seng index closed up 0.52 per cent at 24427.