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HK Stocks Close 2018 On Up Note, Low China PMI Weighs

Asian stocks rose in the last day of trading for the year Monday - Asian stocks rose in the last day of trading for the year Monday, with investors focusing on positive hints about the progress of U.S.-China trade talks and overlooking some negative economic signals out of China.

Markets in mainland China and Japan were closed and other markets in the region, including Hong Kong, had shortened sessions so trading was generally thin. Still, investors got past the news that manufacturing activity in China contracted more than analysts and economists had expected.

Hong Kong’s Hang Seng Index closed off a short trading at 11 AM ET (4:00 AM GMT) up 1.34% to 25,845. The positive close marked an end to the worst year for Asian stocks since 2011. The Hang Seng Index fell more than 15% through the year.

Australia also ended a short day in positive territory, with the S&P/ASX 200 down 0.14% to 5,646.

Markets in mainland China did worse, putting in the worst performance among major stock markets in the world through 2018. The Shanghai Composite Index lost about a quarter of its value through the year.

And the latest economic indicator out of China might worry investors at the beginning of 2019.

China’s official Purchasing Managers’ Index (PMI) for December released by the National Bureau of Statistics on Friday was 49.4, missing the 49.9 reading that analysts polled by Reuters had expected. A measure below 50 signals contraction.

The December PMI was the weakest since February 2016, according to Reuters, and fell below an already weak reading of 50 recorded in November. New export orders have fallen for seven months straight.

A silver lining was the non-manufacturing PMI, which came in at 53.8, higher than the 53.4 measured in November. This might be good news for some investors, given that services make up about half of the country’s economy.

Still, the low manufacturing PMI numbers “suggest the economy is still decelerating,” Frederic Neumann, co-head of Asian Economics Research at HSBC told CNBC. “That’s going to weigh down not just Chinese GDP growth but really global trade.”

Lending support to stocks were comments from U.S. President Donald Trump over the weekend pointing to significant progress in trade talks with China.

Trump tweeted that negotiations are “moving very well” and “big progress” has been made. He pointed to a “very good call” with Chinese President Xi Jinping on Saturday. In comments to state media, Chinese President Xi Jinping said both the U.S. and China are looking for “stable progress.”

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