Quarterly Business Magazine

Hong Kong Stocks Resume Retreat as Protest Fallout Deepens

Posted :
Tuesday, August 13, 2019

Hong Kong’s stocks fell amid renewed pressure after protesters brought the city’s airport to a standstill Monday, highlighting the economic fallout from weeks of anti-government demonstrations that show no sign of easing.

The Hang Seng Index fell as much as 1.7% Tuesday, as the city’s international airport continued to suffer flight cancellations as it resumed operations after a mass sit-in by anti-government protesters.

Bank, developer and casino-related shares were among leading decliners. A gauge of property-related stocks slipped 1.7% as of 11:26 a.m. in the city, while a Bloomberg measure of Macau casino stocks dropped 2.4%. Cathay Pacific Airways Ltd, which on Monday tumbled to its lowest levels in a decade after drawing China’s wrath over Hong Kong protests, fell as much as 5.4%.

Hong Kong’s embattled leader Carrie Lam deflected questions about whether she and her government needed a course correction in a rowdy news conference Tuesday.

Black-clad protesters swarmed the airport Monday, causing the biggest disruption yet to the city since the unrest began in June, after a weekend of violence that saw police fire tear gas into a subway station and rubber bullets at close range. The Hang Seng China Enterprises Index of Chinese firms has lost more than 16% since its April high, not far from entering a technical bear market. The MSCI Hong Kong Index has fallen more than 14% since a recent peak on July 19.

Hong Kong’s next crisis may be economic as protest fallout grows

The threat from the trade war and weeks of local unrest is already showing in the property market, as well as tourist numbers, hotel occupancy and retail sales. A weak yuan is another cause for concern, as it will damp spending from mainland visitors and pressure earnings for firms that rely on China. Profits for members of the Hang Seng Index are forecast to drop the most since the global financial crisis this year, data compiled by Bloomberg show.

“It looks like the situation will get worse,” said Airy Lau, investment director at Fair Capital Management Ltd. “Together with the higher global recession risk from U.S.-China friction, the Hang Seng Index is likely to have 5-10% more downside.”

Swire Properties Ltd. -- which operates malls and hotels in the city -- fell 2.2%, taking its losses since June 10 to 23%. MTR Corp., regarded as one of Hong Kong’s safest stocks before the protests began, slipped as much as 3.7%.

Mainland investors have made the most of the slump in Hong Kong-listed equities, purchasing stocks through exchange links every day this month. They bought a net $289 million worth of the city’s shares on Monday, even as onshore markets rallied.

By Sofia Horta e Costa and Ken Wang


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