China, Hong Kong stocks resume gains as investors look past escalating tension in Middle East

China and Hong Kong stocks rebounded as traders looked past the tensions in the Middle East to focus on economic fundamentals.

The Shanghai Composite Index added 0.7 per cent, or 21.39 points, to 3,104.80 at the close on Tuesday, snapping a two-day decline. The Hang Seng Index rose 0.3 per cent to 28,322.06.

Gains in US stocks overnight bolstered sentiment across Asia, with equity gauges from Japan to South Korea rising at least 1 per cent. Gold futures retreated as much as 0.8 per cent from a six-year high on Tuesday, as demand for safe assets faded a bit.

“The risk appetite returned with a vengeance as investors looked past concerns about escalating tension in the Middle East while focusing on the robust US economic data,” said Stephen Innes, a strategist at AxiTrader. “Iran’s economic hardships would deter an attack on any oil infrastructure in the sense that such an attack would likely freeze out any existing Iranian exports and put the Iran economy into an even deeper hole.”

The technology-heavy ChiNext gauge of small-caps in Shenzhen rose to its highest close since April 2018, with a 1.8 per cent gain. A number of factors, such as looser liquidity after a cut in the reserve requirement ratios of banks and earnings growth recovery following massive asset-impairment losses linked with goodwill, could be fuelling its momentum.

Beijing steering savings into equities funds will ensure stocks rally, analysts say

Wens Foodstuff Group, China’s second-largest pig farming company, jumped 6.8 per cent to 38.27 yuan for a seventh straight day of gains, after saying its net income may have surged by as much as 261 per cent from a year earlier in 2019. The rise in its stock also buoyed industry peers. Muyuan Foodstuff climbed 3.8 per cent to 93.80 yuan and Hunan New Wellful added 3.9 per cent to 8.48 yuan.