Asian Shares Mixed as Investors Await US Response to China’s Planned National Security Laws for Hong Kong

The major Asia-Pacific stock indexes finished mixed on Wednesday as unrest in Hong Kong over Beijing proposed national security laws weighed on global shares and oil prices, offsetting optimism about the re-opening of the world economy, as coronavirus containment measures are eased.

Riot police fired pepper pellets on protesters in Hong Kong’s main business district, rekindling concern about the protests seen last year that hit the territory’s economy. The major indexes were capped amid fears the protests would worsen tensions between the United States and China.

On Wednesday, Japan’s Nikkei 225 Index settled at 21419.23, up 148.06 or +0.70%. Hong Kong’s Hang Seng Index closed at 23301.36, down 83.30 or -0.36% and South Korea’s KOSPI Index finished at 2031.20, up 1.42 or +0.07%.

China’s Shanghai Index settled at 2836.80, down 9.74 or -0.34% and Australia’s S&P/ASX 200 Index finished at 5775.00, down 5.00 or -0.09%.

US Considering Sanctions Against China

U.S.-China relations will continue to remain in focus as worsening relations between the two superpowers could further curtail global business activity, which is already under pressure from the coronavirus pandemic. On Tuesday, U.S. President Trump said that he was preparing to take action against China this week over its effort to impose national security laws on Hong Kong.

Nikkei Pauses as Profit-Taking Hits Transport Stocks

Japan’s benchmark stock index, the Nikkei 225, paused on Wednesday after hitting a 2-1/2-month high in the last session, as investors locked in profits from recent strong gains in transport companies.

West Japan Railway dropped 3.3% and Central Japan Railway shed 2.6%, while ANA Holdings slipped 1.3% as investors moved to pocket profits from recent gains. All three had risen this week after Japanese Prime Minister Shinzo Abe on Monday lifted the coronavirus state of emergency in greater Tokyo and northern island of Hokkaido, ending the restrictions nationwide as businesses began to reopen.

China Stocks Fall on Rising Sino-US Tensions, Economic Worries

China stocks weakened on Wednesday as rising Sino-U.S. tensions and lingering worries over the coronavirus damage on the economy curbed risk appetite.

Traders reacted to the news that President Trump was preparing a strong response to China’s planned national security laws for Hong Kong by trimming long positions. Further selling was encouraged as investors monitored the pace of China’s economic recovery from the coronavirus crisis. Profits at the country’s industrial firms fell at a slower pace in April, but the economy faces persistent pressure as activity and demand remain weak.

Australia Shares Dip on Hong Kong Unrest; Banks Outshine

Australian shares eased lower on Wednesday as rising tensions in Hong Kong over China’s proposed security law took the shine off surging bank stocks and tempered expectations of a global economic recovery.

Financial stocks were the standout performers on the Australian benchmark as they firmed 5.3% and hit their highest level since March 16, after brokerage UBS said the sector would benefit from a faster-than-expected economic recovery.

For a look at all of today’s economic events, check out our economic calendar.