Emerging market shares rose on Monday as lockdown easing bolstered hopes for economic recovery, although simmering U.S.-China trade tensions limited the appetite for risk.

Volumes were thin as the Eid al-Fitr religious festival and early summer public holidays closed many markets in Asia, Europe and the United States.

Countries further relaxed restrictions they have enforced to curb the novel coronavirus, prompting investor hopes that recovering demand and activity will limit the extent of an expected deep recession. 

MSCI's index of emerging market stocks rose 0.3%, with South Korea and Taiwan shares up 1.2% and 0.6%, respectively. As a higher open in Western Europe lifted sentiment, stocks in Hungary, Poland .WIG20 and Russia gained between 0.3% and 0.9%.

Mainland China stocks ended 0.1% higher. Hong Kong stocks recovered slightly from a fall of up to 1.8% during the session, triggered by a fresh wave of the pro-democracy protests that nearly paralysed the city last year.

Over the weekend, the White House said China could face U.S. sanctions as Beijing pressed ahead with a national security law in Hong Kong that threatens the city's status as a financial hub.

China's foreign ministry on Monday stood by the legislation, and said illegal acts in Hong Kong posed national security threats.

Hao Zhou, an analyst with Commerzbank, cited the risk of escalating tensions.

"It seems that China is unlikely to back down on this issue, which means that (U.S. President Donald) Trump's response will be critical for the time being," he said.

The Chinese yuan weakened 0.1% with the central bank lowering its mid-point to the weakest since the 2008 global financial crisis.

South Africa's rand slipped 0.2% against a stronger dollar, while stocks  extended losses to a third straight session. President Cyril Ramaphosa on Sunday announced further easing of a lockdown from June 1.

As oil prices attempted to hold gains, crude producer Russia's rouble firmed for the seventh session in eight.

 

(Reporting by Susan Mathew in Bengaluru; editing by Barbara Lewis) ((susan.mathew@thomsonreuters.com; +91-80-6749-1130;))