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Hong Kong Stocks Tumble Erase 2014 Gains, Volatility Soars As Protests Freeze City: Full Summary
The Hong Kong protests, which we covered over the weekend, and which took a dramatic turn for the worse overnight when thousands of students camped out and demand universal suffrage on the city streets and were in turn tear-gassed and arrested en masse by the local riot police demanding students disperse or else, and where the leader of the student protest, Joshua Wong - who had been previously arrested and was released on Sunday night - has openly called for the resignation of Hong Kong Chief Executive Leung Chun-ying in an interview with Hong Kong Cable TV, have done the unthinkable: they have impacted financial markets and the "wealth effect" transmission mechanism of the local billionaires.
Here as a summary of the latest market activity via Bloomberg:
- Hang Seng Index declines 2.25% after falling as much as 2.5%, most since Feb. 4; erases YTD gains
- MSCI Hong Kong Index drops as much as 3.2%, most since Nov. 2011
- HSI Volatility Index surges as much as 27%, most since Aug. 2011
- HKD weakens as much as 0.09% against USD to HK$7.7648, most since Dec. 2011
- Hong Kong 1-yr rate swap rises 3 bps, most since June 2013
- Chinese Yuan falls 0.24%, most since March 20, to 6.1415 per dollar.
- Yuan 12-mo. forwards drop 0.25% to 6.2596 per dollar after falling by as much as 0.34%, most since March 12
- Fitch says events in past 24 hrs won’t significantly affect ratings;
says unlikely that protests will be on wide enough scale and last long
enough to have material effect on H.K.’s economy and financial
stability: Fitch’s Colquhoun
SECTORS, COMPANIES
- Galaxy Entertainment leads decline in Macau casinos
- Luk Fook leads drop in retailers, developers amid protests; Luk Fook shuts 4 stores, Chow Sang closes 6 stores
- Protests will have negative impact on retailers: UBS
- Wharf tumbles most in 16 months amid protests
- Swire Beverages workers strike to support protesters
- Ctrip sees mainlanders’ travel to HK unaffected by protests
- 36 bank branches closed as of 10:30 HK time: HKMA
- Quicktake: Hong Kong Tries to Cut Path From Liberty to Democracy: QuickTake
PRE-MARKET ANALYST REACTION
- H.K. dollar will “inevitably” be under pressure on weakened investor confidence amid political instability, says Daniel Chan, analyst at Brilliant & Bright Investment; interest rates could spike amid potential fund outflows
- “Sentiment will be bad,” said Arthur Kwong, HK-based head of Asia Pacific equities at BNP Paribas Investment Partners. “Unfortunately, the macro fundamentals are weak already.”
- Retailers and tourism-related cos. may be among most affected on speculation protests will deter mainland tourists from visiting H.K. during National Day holidays, said Gavin Parry, managing director of Parry International Trading
- Financial shares may also come under pressure, said Ronald Wan, chief China adviser at Asian Capital Holdings
- Dickie Wong, executive director of research at Kingston Financial, said HSI may fall to about 23,000, or 2.9% below its last close, in the “short term”
- “The markets were not counting on anything extreme to happen,” said Govert Heijboer, HK-based chief investment officer of True Partner Advisor. “Whether it immediately moves or not, implied volatilities will rise in Hong Kong given this additional uncertainty.”
- Protests may deter mainland investors from buying Hong Kong shares when the exchange link starts, said Daniel Chan, analyst at Brilliant & Bright Investment
- “If this concludes in a few days, impact on markets and the economy will be limited, especially with a few holidays ahead,” says Mari Oshidari, strategist at Okasan Securities Group. “But this will make it hard for people to buy in a market that’s lacking positive news to begin with. People in Hong Kong are serious about this issue, and there’s a political risk this may happen again.”
In fact, the threat to the wealth effect is so big, the local central bank had to step in. From the FT:
Hong Kong’s quasi central bank implemented emergency measures on Monday morning as the battle between Hong Kong democracy activists – many of whom spent the night camped on the streets – and police made itself felt on the territory’s businesses and markets.
The Hong Kong Monetary Authority acted after a tense night that saw tear gas and pepper spray used in a failed bid to clear tens of thousands of protesters from a central business district.
Several banks, including HSBC and Standard Chartered, shuttered a handful of branches. The Hong Kong dollar weakened 0.07 per cent against the greenback – to which it is tightly pegged – in early trading, bringing it to a six-month low. The benchmark Hang Seng Index opened 1.4 per cent down at 23,359.
The locals appear undaunted by a possible Beijing crack down. At least undaunted for now:
For most of Sunday, the situation inside the barricaded area had been peaceful. Martin Lee, the founder of the Democratic party, and Jimmy Lai, the media tycoon who owns the anti-Beijing Apple Daily, joined the thousands of students present.
“We don’t expect them [Beijing] to back down but we have to persist with our civil disobedience,” said Mr Lai. “If we don’t persist or resist, then there’s no hope.”
While people in Hong Kong frenetically used social media to spread news about the protests, there was much less reaction on Weibo as the Chinese government blocked any mention of “Occupy Central” on the Twitter-like service.
During the afternoon, it was difficult to use mobile phone services in the protest area, leading to speculation that the government had blocked networks to prevent reporting from the scene.
Finally, while the US was quick to share in its punditry when Ferguson happened in Ferguson, when it moves to China and any word out of place can put US-Sino relations back years, suddenly the White House is all too quiet on the topic of human rights:
So far the US and UK have said very little about protests. Many people believe that the UK wants to avoid hurting trade relations with China. The Foreign Office said it was “important for Hong Kong to preserve and exercise them [rights and freedoms] but it needs to be done within the law”.
Rory Stewart, the Conservative chairman of the cross-party defence committee, said: “We have a special relationship with Hong Kong and we need to find a way of putting as much energy as we can, politically and diplomatically, into supporting them.”
Yes, yes, now... how does one say BTFD in Hong-Kongese(sic)?
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How can something that feels so right be so Wong.
Ludwig von Mises would be getting out of there.
But the really good news is Obama will hit China with "sanctions" and they will quickly be in ruins just like Russia.
Move along, nothing to see here.......
BOOM! There it is. 4 comments until Obama was mentioned in a story about rioting students in Hong Kong. Obsess much?
Ok, kids, you're on the right track. Stay on it and bring this controlled market to it's knees.
Yes ! And to all those who "believe" the kids are used by older freedom fighters, you're wrong.
Did McStain train the protestors?
Two Wongs cannot make a Wright. But one Wong and one Wright, can make a Wong, a Wright, or a Wong-Wright
This must be bullish US equities, if they cant buy em there they are gonna hve to but em here.
The safe haven trade.
Nope. the market has shown symptoms of nervousness and fear over and over again in recent weeks. I think the top is in. the US Market will respond with a sympathy fear drop.
I have to agree with "Never ending Ride" (just once of course) and say he is right -- the markets will rise this week.
It's not that U.S. investments are a safe haven but rather, U.S. stocks are the only place for U.S. dollars and the world is awash in that stuff and it is losing value quickly.
Global investors will be buying condos in Florida and stocks of the solid American companies that might survive the collapse of the dollar. It is ironic that the companies that may survive are all doing business internationally.
Tempest in a teapot, most likely.
I am in HK, and this morning walked extensively around the area in which the protests are being held. Most of the area is completely quiet and semi-deserted. There were still a couple of thousand protesters cheering various speakers in the focal point area, but only a smattering of regular police, appearing very relaxed. Very few banks are closed, so that aspect is also being overblown.
That's not to say that the crowds won't swell again, but as of this morning it was a very small affair. I will add that there were plenty of people providing good support (e.g. water and food) to the protesters, so that will help the core group to remain for some time.
The pertinent questions are, how long will the protesters be allowed to force authorities to block off that important (multi-block) area, and what kind of force will eventually be necessary to disperse them entirely?
Tiananmen Square 2.0?
An American, not US subject.
"Political power grows out of the barrel of a gun." Mao Zedong
If I remember correctly, the last time China really had enough of protesters they used very, very large tanks and ran over them - then they arrested the bulk of them off camera - followed by very, very long prison terms in very, very nice "off camera" prisons. Many of today's protesters were not even born uring this time....."Tiananmen Square protests of 1989"
A friend was in Tiananmen Square on a private tour recently when there was hugh police action for unknown cause. They were instructed to not photograph anything and were taken out of the area. Massive amount of plain clothes police - smart not to use the tanks.
Of course - very bullish today for all markets....Why should we even be concerned?
"That's not to say"
that is the key word ... there is plan, thousands and thousands do not come out because they like to ... got to be organized thats the only way ...
Surreal Monday morning rush hour in Hong Kong. Eight lanes empty of traffic:
https://twitter.com/endacurran/status/516376216664674304/photo/1
Surreal to stroll on one of the busiest roads in HK on Monday morning. Here the PLA HQ:
https://twitter.com/prchovanec/status/516390378145337344
Sun rises on calm overnight protest in Hong Kong:
https://twitter.com/prchovanec/status/516389554740535296
Hong Kong "hands up, don't shoot" emulation of Ferguson protests:
https://twitter.com/prchovanec/status/516390079150182400
Whatever you do, don't fuck with the cash register or there will be hell to pay.
The protest the USA was suppose to have.
We'll see if this spreads to Shanghai and other major "Chinese" Cities (Singapore, places in Southeast Asia.). Don't forget what happened in Vietnam earlier this year.
Chow Sang like the fat lady. game over man, game over.
http://www.youtube.com/watch?v=dsx2vdn7gpY
maybe the monetary authority just needs to throw some fiat at a few mercs to 'handle' this situation.
I guess the tanks will be rolling in soon. And the rest of the world will just go shopping like it always does.
<-- oh look, there's another sale at jcp.
<-- oh look, the fake market is down
SSDD
wonder if the ones not protesting are down the Gold shop loading up...
My dad loved a whore there during nam...hope my half bro is fighting the bastards. Hope he lives. More Yankee than the fucks I dwell with if he does.
Dickie Wong? Really?
The Hong Kongs
And for that special time when the end of sobriety seems to be right around the corner: Here's Mad Mike to put you back straight with The Hunch
What's up with these people wanting a voice, to be heard, to matter?
Can't they just roll over and act like the sheeple in the U.S. and Europe?
/sarc or "sarcasm off now"...
Gold up $1 LOL Silver negative Hang Seng up 150 from the lows, US$ 2.5 Billion POMO coming later should smooth these drops in the Indexes as USJPY hit a new high overnight, can't let this small distraction interfere with Draghi's 1Trillion Euro erection later this week
The other reason UK and the US are keeping quiet about the HK protests, officially, is probably this:
Chinese media have publicly accused the US of ties to the protests in HK
exerpt for those too lazy to click links:
Evidence for (the student protest leader) Mr. Wong’s close ties to the U.S. that the paper cited included what the report described as frequent meetings with U.S. consulate personnel in Hong Kong and covert donations from Americans to Mr. Wong. As evidence, the paper cited photographs leaked by “netizens.” The story also said Mr. Wong’s family visited Macau in 2011 at the invitation of the American Chamber of Commerce,
The HK protests are being instigated by Putin and ISIS. Discuss.
And the moon is made of green cheese.
Nemo
I've been waiting for this for a long time. Now the property market will probably decline in a meaningful way. I can grab some cheap assets. Whenever there is risk there is opportunity
Meanwhile back in 'merica
Show me the money! Show me the money!
Students. They need to go back to their dorms and do kegstands.
The Federal Reserve's has a solution, print more dollars. It's their solution to everything now.
When in doubt, print.
Have not been digging deeply into this one. Is it another Soros/Nuland operation?
As a follow-up to my above post, the crowds have increased significantly since this morning (it's now early evening), and not only around the Government building epicenter. What I find striking is how well behaved the protesters are, at least at this stage. They certainly aren't provoking violence in any way.
The conundrum remains for the authorities, though: how will they ultimately disperse the protesters and free up the increasingly large blocks of the city that have been effectively closed to traffic without using violence?
Dickie Wong? LMAO
Tyler, Cantonese is predominately spoken in Hong Kong although there are other languages, ie, dialects.
I don't know if anyone has noticed but the first police response was by general duties officers dressed as normal, contrast this with so called 'cops' in the US who call out to domestics with armoured trucks and heavy caliber machine guns and dressed in riot gear.
Leveraged, were you at Tianamin Square or are you just spouting what you were told by the 'media' at the time. And there is No film of this so called massacre, anywhere. Perhaps you believe everything the press tell you, I don't. I was watching it on tv the day it happened.
China has a long way to go, but from my obsevations it is getting better.
The protests in HK do disturb me as I go there quite often, and I really do love the place and its people. I have friends there.
HK is no stranger to protests but it is abnormal to be violent.
What would happen in the US if a large group of protestors were to camp out for many months in the headquarters of a very large bank in NYC, ie Bank of America. This been happening at HSBC In Central HK without interferance from the police. I would hate to see what would happen in the US.
It is better to do some research or witness yourself before believing what the press report as fact. At one time you could trust them but it is many years since that was true.
Nemo
Whenever I hear a politician say he or she is a public servant, I want to pull an ISIS on them - knowing the enemy is the first step to victory...
Two of the most feared sentences said.
'Trust me, I'm a politician'
'I'm from the goverment, I am here to help'
Nemo
Could this be the Black Swan trigger for the whole show?
Financial market prefers predictability and stability. I believe beijing will use that execuse to roll out their so-called WuJin or Military Police that was set up right after 1989 Massacre. WuJin is heavily armed with crowd-control light tanks and APCs, and in fact the American militarization of police borrowed the Chinese WuJin practice.