Hong Kong’s stock market surged to a three-year high on Tuesday, leading gains across Asian markets as investors became increasingly optimistic about the outlook for China, the world’s second-largest economy. Positive data and government measures aimed at bolstering domestic consumption provided a boost to sentiment.
The Hang Seng Index rose by 2% during morning trading, marking a 23% increase year-to-date, the largest gain among major global markets. The rally in Hong Kong stocks was also reflected in other currencies linked to China’s economic health, with the New Zealand dollar hitting a three-month high of $0.5827 as short sellers scrambled to cover their positions. The Australian dollar, sensitive to Chinese demand for exports, reached a one-month high just below $0.64, while the Chinese yuan hovered near its strongest levels of the year.
A more optimistic global sentiment emerged as China’s recent economic policies garnered attention. Over the weekend, the Chinese government unveiled a childcare subsidy program and a “special action plan” designed to boost domestic consumption. Additionally, retail sales data for January and February showed signs of improvement, further lifting investor confidence. U.S. President Donald Trump’s mention of a potential visit to the U.S. by Chinese President Xi Jinping raised hopes that a trade deal might be in the works, which could lead to tariff reductions.
Nick Ferres, Chief Investment Officer at Vantage Point Asset Management, noted that market momentum and sentiment were shifting positively. “Momentum and sentiment are shifting now in a positive way,” he said, reflecting broader investor optimism in the region.
Meanwhile, the Hong Kong dollar remained firmly within the strong half of its trading band against the U.S. dollar, and Hong Kong interbank rates had been declining, signaling a flood of capital into the financial hub.
Mainland Chinese stocks saw more modest gains, but regional markets across Asia-Pacific also posted positive moves, with Seoul, Sydney, and Taipei rising. Japan’s Nikkei index surged by 1.5%, marking its largest gain in three weeks.
While U.S. stocks stabilized overnight, the mood remained cautious ahead of key events in April, including the implementation of potential reciprocal tariffs by the Trump administration. Softer-than-expected U.S. retail sales and factory activity data continued to pressure the U.S. dollar, contributing to gains in gold, which reached a record high of $3,005 per ounce in Asia.
In currency markets, the euro remained strong above $1.09, while the British pound touched a four-month high, just under $1.30. Ten-year U.S. Treasury yields held steady at 4.293%.
Looking ahead, markets will be eyeing a German economic survey later in the day, but attention will largely be focused on the U.S. Federal Reserve’s meeting, which concludes on Wednesday. Additionally, a scheduled phone call between U.S. President Trump and Russian President Vladimir Putin, where the two leaders are expected to discuss the ongoing Ukraine war, could also impact market dynamics.
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