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Market Outlook: Equity indices clear big hurdles even as Hong Kong tensions simmer

Equities are holding on to recent gains
May 28, 2020

Tensions between the US and China are worsening, with the two sides clashing at the UN over Hong Kong. China rejected a US proposal for the Security Council to meet over the issue, whilst US secretary of state Mike Pompeo declared that Hong Kong is no longer autonomous from Beijing. China’s ‘parliament’ this morning approved the controversial national security legislation for the territory. 

We also note reports this morning that China escorted a US navy ship out of its waters. Meanwhile Taiwan is to buy Harpoon anti-ship missiles from the US, which is likely to further rile Beijing. Tensions are showing signs they could boil over – we cannot play down the importance of an embattled US president facing a national crisis at home in an election year – one he can blame on his chief geopolitical adversary. Expect more sabre rattling. 

Shares in Hong Kong and Taiwan fell, whilst Japanese equities rose by more than 2 per cent in a mixed session overnight in Asia. The FTSE 100 rallied towards 6200 on the open, but shares in Standard Chartered and HSBC fell, signalling investor concern about what’s going on in Hong Kong.  

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