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Mercados

Hong Kong shares surge in relief rally after Trump comments; Shanghai up 2%

* Hang Seng index +3.22%, on track for best day since March 25

* SSEC +1.97%, CSI300 +2.42%

* Trump’s response to HK security law less severe than feared

* Mainland investors weigh possible settlement system changes

SHANGHAI, June 1 (Reuters) - Hong Kong shares surged on Monday as investors expressed relief that U.S. President Donald Trump did not immediately end special privileges accorded to Hong Kong by Washington, while stronger-than-expected manufacturing activity lifted mainland indexes.

At the midday break, the benchmark Hang Seng index was trading 3.22% higher, putting the index on track for its strongest day since March 25.

The Hang Seng’s China enterprises index rose 2.86%, and the HSI property sector sub-index added 4.17%.

“The (U.S.) President on the matter of Hong Kong had stopped short of sanctions or even touching on any other fresh restrictions or potential trade barriers against fears, helping to ease some of the frayed nerves across U.S. to Asia,” Jingyi Pan, market strategist at IG, said in a note.

Trump on Friday ordered his administration to begin the process of eliminating special U.S. treatment for Hong Kong to punish China, saying Beijing had broken its word over Hong Kong’s autonomy by moving to impose new national security legislation, and that the territory no longer warranted U.S. economic privileges.

Mainland indexes also rallied, helped by data that showed China’s factory activity unexpectedly returned to growth in May, though export orders continued to shrink.

The blue-chip CSI300 index was 2.42% higher, also set for its biggest one-day gain since March 25. The Shanghai Composite index added 1.97%.

Zhang Yanbing, an analyst at Zheshang Securities in Shanghai, said the market was also weighing the possibility of changes to stock trading settlement.

The Shanghai Stock Exchange said late on Friday it was researching the possible implementation of a same-day settlement system, which would allow investors to buy and sell securities on the same day.

A sub-index tracking securities firms, which would stand to benefit from such a change, soared 3.95%.

Despite Monday’s rally, the Hang Seng remains about 2.4% below its closing level on May 21. Hong Kong shares had their biggest one-day drop since 2015 on May 22, after China initially proposed imposing national security legislation on Hong Kong.

The proposal, approved by China’s parliament last week, prompted a revival of protests against what protesters say is China’s deep encroachment on Hong Kong’s autonomy and freedoms. (Reporting by Andrew Galbraith; Editing by Jacqueline Wong)

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