June 1, 2020 / 8:36 AM / a month ago

Relief rally over Trump comments boosts Hong Kong shares

* Hang Seng index +3.36%, biggest one-day gain since March 25

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

* Properties sub-index rises 4.31%

* Mainland shares rise on upbeat factory data

June 1 (Reuters) - Hong Kong’s benchmark index surged on Monday as investors expressed relief that U.S. President Donald Trump did not immediately end special privileges accorded to the Asian financial hub by Washington.

At the close of trade, the Hang Seng index was up 3.36%, its biggest one-day percentage gain since March 25.

The Hang Seng’s China enterprises index rose 2.85%, and the HSI property sector sub-index added 4.31%.

“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 the 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.

However, by stopping short of calling for an immediate end to the special treatment, Trump’s comments came as a relief to many investors.

“The economic impact (of the move) is likely to be negligible. The U.S. consulate is not closing. There are no pressures on U.S. firms either to exit HK or not to establish a subsidiary in HK,” analysts at Jefferies said in a note.

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

The blue-chip CSI300 index posted its biggest one-day percentage gain since March 2, ending 2.7% higher. The Shanghai Composite index had its best day since March 24, adding 2.21%.

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 freedom. (Reporting by Andrew Galbraith; Additional reporting by Noah Sin in Hong Kong; Editing by Jacqueline Wong and Sherry Jacob-Phillips)

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