HK stocks extend rout as security law, street protests signal rocky months ahead in election year

26-May-2020 Intellasia | South China Morning Post | 6:02 AM Print This Post

Hong Kong stocks tumbled, extending the market’s biggest rout in almost five years, after thousands of demonstrators took to the street in a fresh round of protests against a proposed security law aimed at cracking down dissidents.

The Hang Seng Index fell 1 per cent, or 228.82 points, to 22,701.32 at the noon break, bringing this year’s decline to 19 per cent. The Shanghai Composite Index slipped less than 0.1 per cent to 2,812.96.

Hong Kong’s stock market lost more than HK$1.6 trillion (US$210 billion) in value on Friday, as the index slumped the most since July 2015 after Beijing unveiled the proposed law tailor-made for the city.

The Hang Seng’s volatility index surged to its highest level in seven weeks as traders trimmed their positions on concerns social unrest will jeopardise the city’s status as a global financial centre, even as top officials attempted to allay those fears. The city is also caught in the middle of rising US and China hostility on trade and pandemic fronts.

“With more riots in the street amid the knockdown effects of Covid-19 and a possible exodus of jobs from the financial centre, surely things will get much worse” before they get better, said Stephen Innes, a strategist at AxiCorp.

The controversial security law heralds a rocky road for investors leading up to Hong Kong’s Legislative Council election in early September. The opposition bloc is seeking to win control of Legco for the first time since Hong Kong returned to Chinese rule in 1997, emboldened by a landslide victory in November’s district council elections.

That unrest, which last year sent the market into one of its worst quarters in four years, could undermine the government’s efforts to rebuild the recession-hit economy, following a record contraction of 8.9 per cent in the first quarter amid the coronavirus pandemic.

Henderson Land Development and other property developers bore the brunt of the sell-off again, on speculation capital outflows will weaken asset prices. Alibaba Group, which owns the South China Morning Post, slid for a third day, after forecasting slowing revenue growth this year.

Today’s slide contrasted with gains in other markets in the Asia-Pacific region, as Japan is set to lift the emergency status in Tokyo and Hokkaido and schools reopened in Australia. The Nikkei 225 and the S&P/ASX 200 Index advanced by more than 1 per cent.

Hong Kong police arrested at least 180 people on Sunday and fired multiple rounds of tear gas to break up protests in the Causeway Bay shopping district. The unrest came just hours after vice-premier Han Zheng, Beijing’s top leader in charge of Hong Kong affairs, said the central government would carry out the security law “till the end.”

In a sign of further escalation of the tension between China and the US, the Trump administration slapped sanctions on 33 Chinese companies and institutions for either supporting procurement of items for military end-use or violating human rights, putting them on two so-called entity lists that will make them more difficult to access US technologies.

A sub-index tracking the biggest developers on the Hang Seng Index retreated 1.3 per cent after sliding 7.7 per cent on Friday. Henderson Land shed 3.3 per cent to HK$26.80 and CK Asset Holdings lost 3.1 per cent to HK$41.30.

Alibaba sank 2 per cent to HK$194.20, bringing its two-day loss to 6.1 per cent. The e-commerce group cut the sales growth forecast for this year to about 28 per cent from 35 per cent. It reported a 22 per cent increase in revenue in the March quarter, the slowest on record.

In the mainland, Fiberhome Telecommunication Technologies, a maker of fibre cables, slumped 9.2 per cent to 29.20 yuan as a unit of the company was named on the entity list by the US.


Category: Hong Kong

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