Protests rattle Hong Kong stocks

The stand-off between Beijing and Hong Kong protesters has knocked investor confidence.

Hong Kong's pro-democracy protesters, who had endured tear gas last weekend, showed no sign of dispersing early this week.

What began as a "meticulously planned act of civil disobedience", says Robyn Mak and John Foley on Breakingviews.com, "risks spiralling into something more volatile and unpredictable, with damaging long-term implications" for the territory.

The local stockmarket has slid by 9% since the beginning of September, while last Monday saw the Hong Kong dollar's biggest one-day fall since 2011. Thestand-off has helped fuel an emerging-market sell-off and caused a wobblein developed markets.

The clash could escalate, as Beijing's heavy-handed refusal to rule out universal suffrage in 2017 has "backed the students into a corner", says the FT. They may well be tempted to dig their heels in.

The immediate casualty of the crisis, says William Pesek on Bloombergviews.com, is Hong Kong's reputation as a financial centre. Beijing is "remaking Hong Kong in China's deteriorating image" if the attack on Hong Kong's "liberties and institutions" goes on, multinationalswill up sticks for Singapore.

That would undermine China's long-term prospects too, noted Capital Economics, while a violent crackdown by Beijing could prompt the rest of the world to impose sanctions on China. That, in turn, could also have serious consequences for the countries that depend on its growth.

In the near term, the economic outlook for the former British territory has deteriorated.A worsening crisis could damage confidence enough to dent the property market, where prices have more than doubled since 2009. That implies knock-on effects for banks and the financial sector is worth several times the territory's GDP and half the stockmarket.

To make matters worse, Hong Kong's banks are highly exposed to the mainland's (already collapsing) property bubble. And the Hong Kong authorities' scope for combating a slowdown is limited, as the Hong Kong dollar is pegged to its US counterpart (it is allowed to move in a narrow range). Hong Kong essentially imports US monetary policy, which is about to tighten.

So, "even if sanity and democracy prevail", concludes James Mackintosh in the FT, investors in Hong Kong "would be advised to hang on to their umbrellas, just in case".

Recommended

Emerging markets fall behind their developed-world counterparts
Emerging markets

Emerging markets fall behind their developed-world counterparts

While developed-world markets look forward to a recovery, emerging market stocks have tumbled as foreign investors pull out cash.
16 Apr 2021
Four of the best investment trusts for investing in emerging markets
Investment trusts

Four of the best investment trusts for investing in emerging markets

Investors need to tread very carefully in this risky sector. Here are the best ways to approach it
22 Mar 2021
Storm brews in emerging markets as investors pull cash out
Emerging markets

Storm brews in emerging markets as investors pull cash out

Foreign investors have begun to pull cash out of emerging markets as they begin to look less attractive when compared to the rising return from holdin…
12 Mar 2021
Stockmarkets shrug off turbulence
Stockmarkets

Stockmarkets shrug off turbulence

Stockmarkets have hit their first bout of turbulence of the year, but most are clinging onto January’s gains.
4 Feb 2021

Most Popular

Lab-grown meat: how “moo’s law” will drive innovation
Soft commodities

Lab-grown meat: how “moo’s law” will drive innovation

Jim Mellon and Anthony Chow, co-founders of Aim-listed Agronomics, explain why they believe that “cellular agriculture” will benefit from massive long…
16 Apr 2021
The bitcoin bubble will burst: here’s how to play it
Bitcoin

The bitcoin bubble will burst: here’s how to play it

The cryptocurrency’s price has soared far beyond its fundamentals, says Matthew Partridge. Here, he looks at how to short bitcoin.
12 Apr 2021
Lab-grown meat: the new agricultural revolution
Soft commodities

Lab-grown meat: the new agricultural revolution

Vegan alternatives are taking off, but the future of food technology lies in lab-grown meat – cultivating steaks and burgers from animal cells, says A…
16 Apr 2021