Beijing Tax Cut Plan Boosts HK, Shanghai Markets

Hong Kong stocks bounced back on Tuesday from the previous day's sharp losses as investors welcomed news that Chinese officials have lined up large tax cuts to help boost the economy.

The Hang Seng Index climbed just over 2 percent, to end at 26,830.

On the mainland, the Shanghai Composite Index gained 1.4 percent, to 2,570, while the Shenzhen Composite Index added 1.5 percent, to 1,323.

Tokyo gained 1 percent while Seoul, Singapore, Taipei and Mumbai were each more than one percent higher. Sydney, Wellington and Jakarta were also well up.

The market rebound after the previous day's sharp losses on reports that Beijing would take steps like tax cuts to boost the economy in the first quarter. The People's Bank of China also indicated it would loosen the purse to boost small and medium firms.

The mainland's disappointing trade data on Monday sent shivers through trading floors as it showed the long-running US tariffs row is beginning to bite.

"To some extent, the market is gradually shrugging this off as a one-off incident. The impetus this provides for a US-China resolution had also likely inspired the gains," said Jingyi Pan of IG in a market commentary.

The pound continues to rise against the US dollar and is now sitting above the $1.29 mark for the first time since late November ahead of the vote by MPs on Prime Minister Theresa May's controversial Brexit deal. In Hong Kong, the British currency traded at HK$10.09 by Tuesday evening.

While the plan is expected to lose, experts say the margin of loss will be key. A massive defeat for the government would mean her deal is dead in the water and the pound could dive to a two-year low of around US$1.22.

However, a smaller loss could provide some wiggle room for May to hammer out a more palatable agreement with her EU counterparts. (AFP, AP)