Hong Kong shares lead gains in Asia as democrats sweep election

Shares in Hong Kong led gains across Asia’s financial markets on Monday, after key elections brought more pro-democracy councillors to power and China announced a tightening of intellectual property regulations that could ease trade talks with the United States.

Investors were cautiously optimistic about China’s decision to raise penalties on intellectual property (IP) theft and reduce frequent violations, long a sore point in trade negotiations with the US, which has frequently complained about forced technology transfers.

The Hang Seng index was up 1.8 percent, outstripping the 0.3 gain of MSCI’s broadest index of Asia Pacific shares outside Japan.

Japan’s Nikkei rose 0.8 percent in early trade, while Australian stocks rose 0.5 percent. China’s CSI 300 index, which includes its biggest companies, also saw its shares climb by 0.5 percent.

On Sunday, the Chinese government said it would consider lowering the thresholds for criminal punishments against those who steal intellectual property, reduce frequent IP violations by 2022 and plans to make it easier for victims to receive compensation.

Hong Kong’s strong performance was mostly due to this latest encouraging development in the US-China trade talks, Jeffrey Halley, Senior Market Analyst for Asia Pacific at OANDA told Al Jazeera.

But the “peaceful” conclusion of domestic council elections has also eased the negative sentiment clouding the city, as protesters took to the ballot boxes instead of the streets on Sunday, he said.

Hong Kong pro-democracy parties took nearly 90 percent of district council seats following a record-high voter turnout of 71 percent for the elections, according to data from the Hong Kong Electoral Affairs Commission.

“It all really depends on the trade talks, but in the short term, I don’t see any reason why Hong Kong won’t trend higher,” Halley said.

Chinese e-commerce company Alibaba’s listing in Hong Kong on Tuesday, which will raise 88 billion Hong Kong dollars ($11.2bn), is also a potential reason Hong Kong stocks are holding up, he said.

While US and Chinese officials remain hopeful that the first phase of a trade deal can be signed by the end of the year, China’s response to protests in Hong Kong will also be closely watched.

US President Donald Trump said on Friday he would “take a very good look at” legislation backing protesters in Hong Kong, although he has made no firm commitment to supporting the pro-democracy movement there.

On Saturday, US national security adviser Robert O’Brien said an initial trade agreement with China was still possible by the end of the year, but warned Washington would not turn a blind eye to what happens in Hong Kong.

Hong Kong’s Chief Executive Carrie Lam said following the district council elections that her administration respected the results of the election and would listen to the views of the public with an open mind.

Paul Tse, a pro-Beijing legislator in Hong Kong, told Al Jazeera that the government should now “look at the five major demands and if any of them can be dealt with more satisfactorily than before”.

“We may need to look at the reshuffling of the cabinet in time, although timing-wise, (now) might not be the best time,” he said.