Monday , September 23 2019

Hong Kong protests besides US-China trade war add to stock traders’ worries

Bloomberg

Hong Kong stock traders have a lot to contend with right now. A trade war between China and the US, a slumping yuan, spiking interbank rates and now street protests that have spilled across the city’s financial district in a repeat of 2014’s Occupy movement.
The last two — rates and protests — have combined to snuff out a nascent recovery in the benchmark Hang Seng Index after last month’s
9.4 percent drubbing. The gauge tumbled as much as 2 percent on Wednesday after the one-month interbank borrowing cost surged to a decade-high and protesters demanded the city’s government drop a planned bill that would allow extradition to mainland China.
There is little visibility right now on how these issues may be resolved. Few expect progress on trade negotiations before the Group of 20 meeting at the end of the month, while analysts increasingly think China will allow the yuan will weaken past a level it’s not breached since the global financial crisis. That’s bad news for Chinese companies listed in Hong Kong, whose earnings are generated in yuan.
Surging Hong Kong interbank rates, which are likely rising due to quarter-end demand for cash, may stay elevated until next month. That will weigh on the city’s equities as well as the dominant property developers.
The outcome, and impact, of the protests are harder
to predict.
In 2003 and 2012, demonstrators succeeded in forcing the local government to climb down on unpopular bills related to national security and patriotic education.
Massive protests in 2014 aimed at achieving greater democracy for the former British colony fizzled out
in failure after more than
70 days of sit-ins.

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