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BEIJING, China – Stocks in China and Hong Kong rallied on Monday after the key elections in Hong Kong and along with the fresh outlook on the Sino-US trade negotiations after both the leaders from the two of the largest economies in the world sent optimistic signals.

The Hang Seng Index in Hong Kong rose up to 1.8% towards 27,062.53 points. The Hong Kong China Enterprise Index (HSCE) has also added a 1.5% increase in stock prices, going up towards its current 10,661.04 points.

The positive sentiments on Hong Kong and Chinese stocks came after the leaders from both China and the US expressed their desire to reach an agreement on phase one of the long-standing trade talks on Friday. The government leaders have also underscored their wants to defuse the tariff war that has been going on for over 16months, which has negatively affected the global economic growth. The recent statements from both the US and China regarding the trade talks have further increased the hopes of the market that a trade agreement will be signed soon.

On Saturday, Robert O-Brien, US national security adviser, also said that signing the initial phase of the trade agreement is possible before the year ends. However, he also warned that the US government would not turn a blind eye on what has been happening in Hong Kong for months. The comment about Hong Kong came after China expressed their contempt with the US interfering with the ongoing political unrest in Hong Kong.

On the other hand, the landslide win of pro-democracy candidates during the district council elections in Hong Kong has furthered the optimistic sentiments in the market on Monday. The elections with a record turnout number on Sunday has helped lift up the market amid the six months of pro-democracy protests in the city.

According to a Hong Kong-based analyst, Linus Yip, the positive results of the election, along with the increasing hope for the trade agreement, powered up the market to its current gains.

With the positive updates on trade talks and optimism over Hong Kong’s election results are expected to continue to drive the financial markets throughout the week. The liquidity situation for the market is also expected to have a more positive return. Increasing optimism came after the report that the funds that were previously frozen for the subscription on the share sales of Alibaba will now start to flow back. The e-commerce behemoth is expected to resume trading in Hong Kong on Tuesday, said Yip.

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