Dan AtkinsonThe Hong Kong Stock Exchange, long seen as a jewel of Far Eastern financial services and a hub for investment in the region, is caught in a perfect storm: domestic political unrest, a US-China trade war and fears that the economy of its giant mainland neighbour is slowing down.
Its blue-chip Hang Seng 50 share index has taken a hammering as traders and investors scale back their positions.
As sometimes-violent protest in favour of democracy and against aspects of rule from mainland China rage in the streets outside, trading screens have been turning red as the market faced a witches’ brew of big risks.
“Red chips”
Currently, the Hang Seng is trading at 25,976.24. A month ago, on 8 July, it stood at 28,331.69, and three months ago, on 6 May, it was worth 29,209.82.
One consolation is that the decline does not look as bad when the comparison is made 12 months back – on 6 August 2018, the Hang Seng stood at 27,819.56.
There are various types of shares in the index, which boasts of a “cross-market approach to capture the investment opportunities created by exposure to a comprehensive China investment universe”.
A and B shares are those listed on the mainland but tradable in Hong Kong, H shares are Hong Kong-issued stocks and “Red Chips” are the shares of mainland-based companies that are listed in Hong Kong.
Many of the great names of Chinese business and industry are listed in the Hang Seng 50. Unsurprisingly, many of their names contain the word China.
So, there are infrastructure groups China Communications Construction and China Overseas, telecoms companies China Mobile and China Telecom and insurer China Life.
Banking is represented by Industrial Bank, the Industrial and Commercial Bank of China, CM Bank and Citic Bank. SAIC Motor flies the flag for the Chinese automotive sector while Tencent’s activities in internet services and artificial intelligence are world-renowned.
“Escalating trade tensions”
Wuliangye makes the liquor from which it takes its name, while Yili’s success in dairy products highlights a big change in the dietary habits of Chinese people, who have previously shunned milk-related foodstuffs.
The protests have been under way for nine weeks now. Initially, they were sparked by a now-shelved plan to allow people to be extradited from the former British colony to face trial on the mainland, but have since widened into a broader pro-democracy protest.
Meanwhile, the US-China trade war is seen as bad for business on the Hong Kong exchange, while the Chinese economy is feared to be slowing º a danger to which the International Monetary Fund alluded in its July economic update.
It said: “About 70% of the increase in the global growth forecast for 2020 relative to 2019 is accounted for by projected stabilisation or recovery in stressed economies. In turn, these factors rely on a conducive global policy backdrop that ensures the dovish tilt of central banks and the build-up of policy stimulus in China are not blunted by escalating trade tensions or a disorderly Brexit.”
