Hong Kong Stocks Crushed By Protestors Dragging Asia Lower

The tragic shooting of a Hong Kong protestor by the police this morning has sparked an aggressive sell-off of Hong Kong stocks that has dragged regional markets with it.

To be fair, the protests had escalated island-wide over the weekend and had, rather unusually continued into today. With Hong Kong already in recession and tourism in free fall, leisure companies and property companies led the rout lower. Hong Kong is now 2.80% lower on the day with no sign of any recovery in sight as investors fret that the chances of direct action from the mainland are now seriously increasing. I have always been sceptical of that myself, but find myself increasingly doubtful of that view after today. More concerning is that the US may be forced to make some sort of diplomatic response to the escalating situation which could affect the trade talks with China, hence the Asian-wide spillover today.

The contagion spilt over into the Mainland where the Shanghai Comp has fallen 1.67%; the CSI 200 has fallen by 1.27% and the A50 by 1.07%. Regional neighbours Japan and South Korea have fared less than expected, with the Nikkei 225 down 0.26%, and the Kospi by 0.34%. China and trade-sensitive Singapore has fared worse though, the Straits Times dropping 1.04%.

The main narrative of the global markets continues to be the US-China trade talks, and these seem to be progressing forward despite the sometimes conflicting rhetoric. It could well be that by tomorrow, the furore has died down somewhat, and the global recovery trade reasserts itself. Much will depend on the US response to the Hong Kong situation.

The offshore Yuan slumped on the opening today as well with USD/CNH jumping 0.40% to 7.0050, some 200 pips. Thereafter, trading has stabilised, with the USD/CNH consolidating its gains and rising slightly to 7.0075. Again, its next move likely rests with the response of the Americans.

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Jeffrey Halley

Jeffrey Halley

Senior Market Analyst - Asia Pacific
With more than 30 years of FX experience – from spot/margin trading and NDFs through to currency options and futures – Jeffrey Halley is OANDA’s senior market analyst for Asia Pacific, responsible for providing timely and relevant macro analysis covering a wide range of asset classes. He has previously worked with leading institutions such as Saxo Capital Markets, DynexCorp Currency Portfolio Management, IG, IFX, Fimat Internationale Banque, HSBC and Barclays. A highly sought-after analyst, Jeffrey has appeared on a wide range of global news channels including Bloomberg, BBC, Reuters, CNBC, MSN, Sky TV, Channel News Asia and the New York Times. He was born in New Zealand and holds an MBA from the Cass Business School.
Jeffrey Halley
Jeffrey Halley

Latest posts by Jeffrey Halley (see all)