Hong Kong stocks tumble as city hit by protests

Hong Kong stocks tumble as city hit by protests

Tens of thousands of protesters have crippled roads around Hong Kong's legislative building
Tens of thousands of protesters have crippled roads around Hong Kong's legislative building AFP/DALE DE LA REY

HONG KONG: Stocks sank in Hong Kong as the city was hit by huge protests that saw tens of thousands of people block key roads, businesses shut up shop and unions encourage members to miss work.

In scenes that revived memories of the 2014 Occupy movement, traffic was brought to a standstill and government offices blocked as crowds demonstrated against a government plan to allow extraditions to China, which was due to be debated Wednesday (Jun 12).

READ: Protests paralyse Hong Kong as reading of extradition bill delayed

READ: Explainer: Why proposed changes to Hong Kong's extradition law are fueling protests

Campaigners have warned that the law would entangle people in the mainland's opaque courts and hammer Hong Kong's reputation as an international business hub. The protests led authorities to delay the reading of the bill to "a later date".

The Hang Seng Index fell 1.73 per cent, or 480.88 points, to 27,308.46, making it the worst performer in Asia on Tuesday.

"Uncertainty on local policies will confuse investors and affect the flows in and out of Hong Kong stocks," said Ronald Wan, chief executive of Partners Capital International. "Investors now need to ponder whether or not to pull out of the market given the local events and global factors including the trade war."

READ: China backs Hong Kong extradition law, opposes 'foreign interference'

READ: Hong Kong leader says extradition Bill will not be scrapped

Banks listed on the HSI took a hit, with some announcing the closure of branches near the protest areas. HSBC shed more than one per cent, while Standard Chartered, Hang Seng Bank and Bank of China Hong Kong were also sharply lower.

Among other firms, market heavyweight Tencent sank more than two per cent, while AAC Technologies shed 3.44 per cent.

Property firm New World Development dived 4.75 per cent, Sino Land was off 3.05 per cent and Henderson Land shed 2.41 per cent.

"Investors remain spooked the extradition bill could have far-reaching consequences for attracting overseas talent and does question the viability of Hong Kong as a leading financial hub, which of course is spooking property investors," said Stephen Innes, managing partner at Vanguard Markets.

The Hong Kong dollar strengthened as the rate banks charge each other to borrow cash - known as the Hong Kong Interbank Borrowing Rate (Hibor) - rose to its highest since 2008 as lenders pulled cash out of the financial system. The rate has been rising for days.

Some observers suggested the increase in Hibor could be down to concerns about fund outflows from the city, though others suggested the money was being used to pay dividends or to meet seasonal demand, which often happens in June. Alibaba's flagged initial public offering has also been tipped to suck up liquidity, experts said.

Sam Chi Yung, a strategist at Springwaters Financial Securities, said: "Recent political events in Hong Kong are affecting investors' confidence on the future of the city.

"A stronger local dollar may hurt exporters while surging Hibors mean higher funding costs for companies with more debt."

The retreat on the HSI was exacerbated by profit-taking after a two-day rally that saw it pile on more than three per cent, while investors are also on edge as they track developments in the China-US trade row

Source: AFP

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