Hong Kong protesters strike market nerves at last

Sino Land

08/08/2019 03:14

(The author is a Reuters Breakingviews columnist.  The opinions
expressed are her own.)
    By Katrina Hamlin
    HONG KONG, Aug 8 (Reuters Breakingviews) - Blockades and
walkouts roiled Hong Kong this week. Unlike similar unrest in
2014, investors are getting anxious. Trade tensions and economic
weakness in China have helped to erase the Hang Seng Index’s
gains this year, but local indicators like real estate and
retail are cooling too. Beijing may not mind that protests
squeeze business, if the rising cost of resistance divides the
movement. That means there could be more disruption to price in.
    A rare general strike on Monday halted traffic and shuttered
shops across the territory, which has endured both peaceful
marches and violent clashes for two months now. Police have
retaliated with tear gas and rubber bullets, while pro-Beijing
and anti-Beijing factions have assaulted each other on streets
and in subway stations. Protesters want a controversial bill
allowing extradition to China to be withdrawn, but have other
demands too, including universal suffrage. 
    Despite the drama, the stock market was open. Hong Kong
shareholders rarely flinch at political crises: they held steady
when protesters occupied the financial hub’s central business
district in 2014. But this time could be different.
    Markets are frazzled. A depreciating yuan, a trade war, and
slowing Chinese demand all hurt Hong Kong’s open economy. While
the S&P 500 is up by double digits year-to-date, the Hang Seng
Index is flat. Local firms that earn most of their revenue in
the special administrative region are particularly hard hit.
Property group Sino Land  0083.HK  is down more than 10% for the
period, and cosmetics seller Sa Sa  0178.HK  has lost a third of
its market capitalisation. Retailers from luxury group Richemont
 CFR.S  to high-street pharmacy Watsons reported flagging sales.
Tourism numbers are growing more slowly than last year, and the
volume of home purchases fell in June, according to Midland
Property. Across the board, companies in the city’s benchmark
are priced at around 13 times future earnings – peers in the S&P
500 are valued closer to 20 times. 
    So far staid bond and credit default swap markets have shown
little reaction to the rapid decay of the city’s status quo.
That might not last. Neither the territory’s nominal leader
Carrie Lam nor her backers in the central government appear open
to compromise. Escalation would further spook markets:
unfortunately that seems more and more likely. 
    On Twitter https://twitter.com/KatrinaHamlin
    
    CONTEXT NEWS
    - Hong Kong’s equities benchmark, the Hang Seng Index, has
gained 0.6% year-to-date as of market close on Aug. 7. The S&P
500 gained 15% in the same period, while China’s CSI 300 rose
20.3%.  
    - Police fired tear gas at protesters in multiple parts of
Hong Kong on Aug. 5 after a general strike hit transport and
retail outlets. 
    - In an address on the same day, the city’s chief executive
Carrie Lam said the territory’s prosperity was at risk, and
warned of an “extremely dangerous situation”. She refused to
meet any of the protesters’ demands.
    - For previous columns by the author, Reuters customers can
click on  HAMLIN/  
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Police battle protesters as strike paralyses Hong Kong   
 urn:newsml:reuters.com:*:nL4N25107D
Hong Kong says dollar peg working well, economy 'challenging'   
 urn:newsml:reuters.com:*:nL4N2532WX
BREAKINGVIEWS - Victor Li is a half mark up on Hong Kong’s
tycoons     urn:newsml:reuters.com:*:nL4N24Y1A5
BREAKINGVIEWS - Hong Kong demonstrators risk muddling the
message     urn:newsml:reuters.com:*:nL4N24K0BH
Graphic: The Hang Seng Index has lagged rivals     https://tmsnrt.rs/2MKMY9C
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 (Editing by Pete Sweeney and Sharon Lam)
 ((katrina.hamlin@thomsonreuters.com; Reuters Messaging:
katrina.hamlin.thomsonreuters.com@reuters.net))