Hong Kong shares up four percent on reports of bill withdrawal

Hang Seng Index stages 'relief rally' on expectations that key demand of protesters will be met.

    Shares in Hong Kong's property and financial sectors were among the biggest gainers following reports that Chief Executive Carrie Lam would withdraw a controversial extradition bill that triggered months of protests [File: Justin Chin/Bloomberg]
    Shares in Hong Kong's property and financial sectors were among the biggest gainers following reports that Chief Executive Carrie Lam would withdraw a controversial extradition bill that triggered months of protests [File: Justin Chin/Bloomberg]

    Hong Kong's key stock index, the Hang Seng, surged more than four percent on Wednesday afternoon, after media reports that the government would officially withdraw an extradition bill that has sparked months of increasingly violent protests.

    The Reuters news agency quoted a government source saying that Hong Kong Chief Executive Carrie Lam would pull the bill. The move would meet one of five key demands made by protesters.

    The Hang Seng Index climbed to 4.05 percent in late trading, outpacing gains of 0.12 percent in Japanese stocks on the Nikkei and the 0.84 percent increase in China's largest index, the CSI300.

    The move to withdraw the bill is "certainly very positive" for Hong Kong equities, Jeffrey Halley, senior market analyst for Asia Pacific at trading firm OANDA, told Al Jazeera.

    "There is value in Hong Kong stocks at the moment," he said.

    "I don't believe China would want to kill their golden goose," Halley added, noting that in light of the trade war with the United States, Hong Kong is still the destination of choice for Chinese companies looking to raise foreign capital.

    Hong Kong's stock market has been battered since protests began earlier this year, with the Hang Seng Index falling about 15 percent since its year-to-date peak in April.

    Property stocks jumped more than seven percent while the financial sector sub-index gained 3.7 percent, Reuters reported.

    Flag carrier Cathay Pacific, which has been caught in the crossfire between Chinese authorities and protesters in Hong Kong, some of which included its employees, also surged more than seven percent. Meanwhile, the airline said its chairman, John Slosar, has resigned. His departure follows the resignation of CEO Rupert Hogg last month.

    "There are people covering their short positions and bargain hunting on local blue chips," said Alex Wang, director at Ample Finance Group, as investors hope the formal withdrawal of the bill "will calm down the situation in the society."

    Stephen Innes, Asia Pacific market strategist at AxiTrader told Al Jazeera: "This is a big relief rally." 

    However, he stressed that the extradition bill is just one of the many issues dragging Hong Kong's economy, and by extension its stocks, lower.

    "There are still a lot of jitters hanging around; the US-China trade war is going to weigh heavily ... This wave of populism could be the beginning, not the end, of negative discourse between Hong Kong and the mainland," Innes said.

    SOURCE: Al Jazeera and news agencies