Δείτε εδώ την ειδική έκδοση

Investors unfazed by Hong Kong unrest

As pro-democracy demonstrations enter their sixth day, much of Hong Kong remains at a standstill.

"Sorry, we are temporarily closed due to social unrest," reads a sign in the window of a downtown luxury car showroom.

But in spite of the disruption to business, the financial community so far appears unfazed. The stock market fell by about 3 per cent earlier this week ahead of the two-day national holiday, a move that barely raised an eyebrow among investors. The Hong Kong dollar, which is tightly pegged to its US counterpart, weakened only briefly.

"The market reaction is frankly not that huge considering you've got paralysis in Hong Kong island", said one analyst at a large global asset manager, who has been instructed not to talk to the press about local politics. "Janet Yellen sneezes and you get more than that."

The Hong Kong stock market is Asia's fourth-largest by market capitalisation, and hosts multinationals such as HSBC, Cheung Kong and insurer AIA, as well as some of the world's largest companies, such as ICBC, China Mobile and Tencent.

Investors say their key concern when judging the market is how fast the US Federal Reserve chooses to increase interest rates. "If I think objectively," the analyst added, "the Fed is still the most important thing in my thinking for the next 12-18 months."

For many, the protests have merely reinforced their negative views on the Hong Kong market. In the wake of the protests, Goldman Sachs has advised equity investor clients to focus their attention on Hong Kong-listed companies with sizeable earnings from outside the territory, reiterating a call made earlier this year.

That chimes with stock market reaction this week, with Macau casinos, luxury retailers and local property developers the biggest losers.

"The market is concerned but not panicked," wrote analysts at Bank of America Merrill Lynch in a note to clients.

Some investors liken the situation in Hong Kong to events earlier this year in Thailand, where thousands of protesters shut down large parts of Bangkok. Events there ultimately led to violence, a military coup and a recession, yet the stock market rallied with little interruption.

Similar to the Thai example, the most visible impact on business in Hong Kong is likely to be a fresh blow to retail sales, which are heavily reliant on tourist spending from mainland visitors.

Even before the protests, the retail market was weak as Chinese tourists looked further afield - such as to Bangkok and Singapore - for their holidays, while those coming to Hong Kong cut back on spending in response to a crackdown on corruption.

The tourism industry had already warned that tour group bookings were set to be far lower during the National Day holiday period than last year. But on Wednesday some mainland tour agencies received notice from Chinese authorities telling them to stop organising new tours to Hong Kong for the weeklong break, although tours already planned could go ahead. The directive said the situation regarding tours to Hong Kong after National Day had not yet been decided.

Economists say the civil disobedience campaign, which is affecting many of Hong Kong's most important shopping districts, is more likely to have exacerbated underlying economic problems than caused new ones.

"As it stands now, it's not that big a deal economically," said one investment bank economist also wary of speaking to the press on the protests. "If this clears in the next couple of weeks, the impact on GDP will be minimal."

While there remains a risk that the political situation escalates or endures, most analysts remain cautiously optimistic that the street demonstrations will subside in the coming days. At that point, the underlying challenges facing the economy are likely to take centre stage once more.

"With the assumption that the protests won't become violent, investors in Hong Kong have other issues to deal with over the foreseeable future. Primarily, US dollar strength and slowing growth in the mainland," wrote Paul Krake, founder of View From the Peak, a local independent research house. "The shock of the protests will come and go."

© The Financial Times Limited 2014. All rights reserved.
FT and Financial Times are trademarks of the Financial Times Ltd.
Not to be redistributed, copied or modified in any way.
Euro2day.gr is solely responsible for providing this translation and the Financial Times Limited does not accept any liability for the accuracy or quality of the translation

ΣΧΟΛΙΑ ΧΡΗΣΤΩΝ

blog comments powered by Disqus
v