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Asian Stocks Mixed After Hong Kong Protests Escalate U.S.-China Tensions

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By Gina Lee – Asian stocks were mixed on Monday morning, with investors digesting an escalation of U.S.-China tensions after protestors took to the streets in Hong Kong on Sunday.

Hong Kong’s Hang Seng slipped 1.39% by 10:55 PM ET (3:55 AM GMT). Thousands participated in Sunday’s protests after China formally proposed new national security laws on Friday during the opening session of the National People’s Congress. Police fired tear gas and a water cannon in the shopping area of Causeway Bay to curb the assembly.

Chinese Foreign Minister Wang Yi warned that the U.S. was potentially pushing toward “a new Cold War” with China after U.S President Donald Trump promised strong U.S. action if the laws are passed. Two U.S. Senators proposed sanctions on entities enforcing the law and the U.S. Commerce Department added 33 Chinese companies and institutions to a blacklist on Friday.

“Risk sentiment proved resilient, on Friday night, to concerns about the fallout from China introducing national security legislation in Hong Kong. Weakness in Asian equities gave way to a flattish European session, and mild positivity in the US,” Hayden Dimes at ANZ Research said in a Monday morning note.

But outside of the Greater China area, markets remained bullish and equities were 30% higher than its March lows, with various stimuli measures kicking in and lower cases numbers in some countries prompting loosened lockdown measures, prompting hopes of a swift economic recovery.

“One big threat to the recovery in markets is the escalating war of words between the U.S. and China,” Shane Oliver, head of investment strategy at AMP (OTC:AMLTF) Capital Investors, told Bloomberg.

“The main focus will likely remain on continuing evidence that the number of new COVID-19 cases is slowing in developed countries, progress towards medical solutions, the reopening of economies and signs that economic activity is picking up.”

China’s Shanghai Composite was down 0.07% and the Shenzhen Component was down 0.36%. Investors will continue to monitor developments during the week from the National People’s Congress.

Meanwhile, the ASX 200 led the gains as it rose 1.40%. South Korea’s KOSPI rose 0.50% and Japan’s Nikkei 225 rose 1.23%. The Japanese government is considering lifting its state of emergency in Tokyo later in the day.

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