Tian Tan Buddha, in Hong Kong. Image: Wikimedia Commons.

Hong Kong used to be at the center of the Asian financial markets, but as mainland China has gained in prominence, many investors have paid far less attention to the Hong Kong stock market. Nevertheless, the special administrative region still has influence, and especially when the Chinese stock markets are closed for holidays -- as they are today -- its stock markets can still reflect what's happening in China and surrounding areas. On Monday, the Hang Seng Index (HSIINDICES: ^HSI) climbed another 348 points to 21,855, extending its gains from late last week as market participants pointed to broad macroeconomic factors as driving the advance. The key question for investors, though, is whether new efforts to bolster economic growth will be more successful than the ones that China and other regional policymakers have already made.

Betting on a recovery?
The Chinese government has long expected for growth to slow in the world's second-largest economy, but the pace at which that deceleration has happened has prompted concern. Most economists expect China to grow at slightly less than the stated government benchmark of 7%, and increasingly, it appears that policymakers are taking steps to try to bolster certain key areas in order to boost overall confidence and have as large an impact as possible.

For instance, a reduction in the amount of the down payment that first-time home buyers in certain cities need to make helped Chinese real-estate developers' stocks, offsetting longer-range concerns about the possibility that China is in a housing bubble. Cutting the tax on purchases of certain cars by half was tailored to help Chinese automakers, which have struggled recently.

Most recently, even the mere report that China was considering how it could help to support the Macau economy was enough to send shares of local gaming stocks soaring on Friday, and those gains continued today. Key players like Galaxy Entertainment and Sands China posted gains of 3% to 5%, and strong attendance over the weekend suggested to some that Macau's long drought could finally be coming to an end -- or at least hitting bottom.

Hong Kong also keeps a close eye on interest rate policy in the U.S., as it has maintained a long-held peg between its local currency and the U.S. dollar. With the Fed looking likely to keep rates low well into the future, investors are breathing a sigh of relief that they won't have to deal with the tension between rising U.S. rates and trends toward easing monetary policy throughout most of the rest of the world.

In the end, Hong Kong's fate will hinge on China's ability to manage its growth. If the emerging-market nation can't sustain its growth at the levels it wants, then the fallout will be felt not only on the mainland and in Hong Kong but also throughout the Asia-Pacific region and the rest of the world. That could make today's solid advance in the Hang Seng disappear quickly.