|Day's Range||24,204.10 - 24,643.84|
|52 Week Range||21,139.26 - 29,174.92|
A rally in global stocks lost pace on Thursday ahead of a closely watched European Central Bank meeting that is expected to announce further stimulus to tackle the economic fallout from the coronavirus pandemic. London’s FTSE 100 was 0.4 per cent lower and the CAC 40 in Paris slipped 0.6 per cent in morning trading. Frankfurt’s Xetra Dax was down 0.7 per cent despite the German government agreeing to a second €130bn stimulus package late on Wednesday.
Australian retail sales suffered a historic plunge in April while the trade surplus narrowed as the coronavirus battered the economy.
(Bloomberg) -- U.S. stocks rose alongside equities in Europe and Asia amid new bouts of stimulus and positive economic signals as coronavirus lockdowns ease. The dollar slumped for a fourth consecutive day.Two shares rose on the S&P 500 Index for every one that fell, lifting the benchmark to its highest since March 4. Gunmakers extended rallies in the wake of President Donald Trump’s promise to deploy large numbers of troops if cities and states don’t act to contain violence from protests over police brutality.Stocks are hovering near their highest in three months as businesses reopen around the world and manufacturing gauges show economies stabilizing following coronavirus shutdowns. That’s despite a slew of risks still on the horizon, including tense U.S.-China relations that may jeopardize a hard-won trade deal. The sometimes violent demonstrations across U.S. cities over the killing by police of George Floyd, an unarmed black man, aren’t yet seen as a major drag on the economy and corporate profits.“Everyone who is assessing what they’re seeing on the news every night is recognizing things getting worse, and yet the markets are focusing on things that they believe are getting better,” said Brian Levitt, a global market strategist at Invesco. Coronavirus “cases have plateaued in aggregate and compressed in some of the hardest hit areas. Mobility is starting to pick up, reopenings are starting to pick up.”Stimulus hopes powered Europe’s Stoxx 600 to a 12-week high as Chancellor Angela Merkel sought to thrash out a second aid package for Germany. Oil gained as investors eyed a potential extension of record production curbs by OPEC+. Treasuries edged lower, while the pound gained on positive news in trade negotiations between Britain and the EU.Elsewhere, emerging-market stocks rallied alongside currencies. Australia’s dollar rose to its highest level since January. In Asia, Tokyo equity benchmarks outperformed.Here are some key events coming up:In Europe, the ECB is expected to top up its rescue program with an additional 500 billion euros of asset purchases at a meeting on Thursday. Anything less than an expansion would be a big shock, Bloomberg Economics said.The U.S. labor market report on Friday will probably show American unemployment soared to 19.6% in May, the highest since the 1930s.These are the main moves in markets:StocksThe S&P 500 Index rose 0.8% at the close of trading in New York for its third straight gain.The Stoxx Europe 600 Index advanced 1.6%.The MSCI Asia Pacific Index increased 1%.The MSCI Emerging Market Index gained 1.7%.CurrenciesThe Bloomberg Dollar Spot Index decreased 0.3%.The euro increased 0.3% to $1.1169.The British pound gained 0.4% to $1.2546.The Japanese yen weakened 1% to 108.66 per dollar.BondsThe yield on 10-year Treasuries rose two basis points to 0.68%.Germany’s 10-year yield declined one basis point to -0.42%.Britain’s 10-year yield fell one basis point to 0.22%.CommoditiesWest Texas Intermediate crude increased 4% to $36.84 a barrel.Gold fell 0.7% to $1,728.12 an ounce.For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
Hong Kong's three million employees covered by the city's compulsory pension fund face a difficult choice: should they stick with their Mandatory Provident Fund (MPF) portfolio or make wholesale changes after last month's rout.With the city's stock market becoming the sentiment barometer for rising US-China tensions and given the uncertain economic outlook, some analysts say it is the right time to buy beaten-down equities while others advocate diversification into other markets.The 44 Hong Kong stock funds under the MPF plan reported a 4 per cent loss on average in May, the worst performer among all fund categories, according to data from Refinitiv Lipper. In comparison, all 414 investment funds produced an average gain of 0.8 per cent.The MPF had HK$969.46 billion (US$125 billion) of assets in 2019, with about one-third invested in local stocks, according to regulatory data. Hong Kong dollar deposits took up 14 per cent, while US stocks and Hong Kong bonds each accounted for 11 per cent."Looking ahead, it seems a V-shaped global economy recovery is unlikely, as the pandemic has disrupted not only the supply chain but also the desire on the demand side," said Elvin Yu, chief executive of Goji Consulting, a pension consultancy."Selective sectors are badly hit, and even large corporations cannot avoid the financial impact. For the rest of this year, volatility in Hong Kong and mainland stock markets is unavoidable, and there would be more downside risk than upside reward."Hong Kong stock funds underperformed their peers within MPF last month, according to Lipper. Japanese equity funds were the best of them, with average gain of 6.6 per cent, followed by US equity funds at 4.8 per cent and European equity funds at 3.8 per cent.A man stands next to a bank electronic board showing the Hang Seng Index rally outside the Hong Kong stock exchange building. A large number of employees covered by the Mandatory Provident Fund invests in Hong Kong stock funds. Photo: AP alt=A man stands next to a bank electronic board showing the Hang Seng Index rally outside the Hong Kong stock exchange building. A large number of employees covered by the Mandatory Provident Fund invests in Hong Kong stock funds. Photo: APThe poor returns of the Hong Kong stock funds came as the Hang Seng Index fell 6.8 per cent in May, making it Asia's worst performing benchmark. On May 22, the index tumbled by the most in almost five years after Beijing said it plans to pass a national security law that will curb secession and sedition in the city.In the first two trading days of this month, however, the index has risen 4.5 per cent amid buying from mainland traders, recouping all the losses since the May 21 announcement by the National People's Congress. Hong Kong Mandatory Provident Fund lost US$13.6 billion in first quarter amid wider market meltdownOthers however said that investors should not rush into any decisions because of short-term setbacks.Kenny Ng Lai-yin, a securities strategist at Everbright Sun Hung Kai, said investors should stick with their investments in Hong Kong and China markets. Both are trading at relatively low valuations compared to other global equity markets, he said."We have a positive view for the Hang Seng Index for the second half, which we believe will reach as high as 26,500," he said, compared to the current level of about 24,300 points. "Therefore, we recommend that MPF investors keep a certain portion [of their funds] in Hong Kong and mainland markets to seize the opportunities."Employers and employees in Hong Kong contribute 5 per cent of monthly salary into the pension fund, with employees deciding how to allocate their money into different investment fund choices. This article originally appeared in the South China Morning Post (SCMP), the most authoritative voice reporting on China and Asia for more than a century. For more SCMP stories, please explore the SCMP app or visit the SCMP's Facebook and Twitter pages. Copyright © 2020 South China Morning Post Publishers Ltd. All rights reserved. Copyright (c) 2020. South China Morning Post Publishers Ltd. All rights reserved.
World stock markets have rallied nearly 36% from March lows on hopes for a swift global economic recovery.
China Huadian Corporation, one of the country's five state-owned electricity generators, will privatise its Hong Kong-traded unit, becoming the latest to take advantage of a slumping market to buy back undervalued assets.Huadian will offer HK$8.3 billion (US$1.06 billion) to buy 2.57 billion shares of the Hong Kong-listed shares of Huadian Fuxin Energy Corporation Limited from minority shareholders, along with 750 million unlisted stock in China, according to a statement.Huadian decided to take its 62.8-per cent unit private as Fuxin's low transaction volume and depressed valuation since its Hong Kong listing in 2012 had constrained its ability to raise funds in the capital markets."Without external equity financing capability, the company has lost the main advantage of a listing platform," Fuxin said in a filing to Hong Kong's bourse late on Monday. "The privatisation will help enhance the flexibility and efficiency of the company's future business development."Huadian's offer for Fuxin is not the only privatisation in play, with 16 "take-private" transactions valued at US$9.5 billion under way on the Hong Kong exchange since the beginning of February, according to Refinitiv's data.The biggest deal in the works is the HK$48.1 billion offer by Hong Kong's Woo family to take Wheelock & Company private. Li & Fung, the global supply chain manager, last week exited the Hong Kong stock exchange after 28 years of listing, following a plan by its controlling shareholders and a partner to take it private.High-efficiency coal power plant, Huadian Fuxin Energy. Photo: Huadian Fuxin Energy alt=High-efficiency coal power plant, Huadian Fuxin Energy. Photo: Huadian Fuxin EnergyLast October, Fuxin's peer Huaneng Renewables " a Hong Kong-listed unit of the nation's largest power generator China Huaneng Corporation " was taken private after a transaction worth HK$2 billion. The controlling shareholder offered minority investors a premium of 46 per cent to take the unit private.A take-private offer for power generation equipment maker Harbin Electric at an 82 per cent premium to the previous closing price " representing 0.45 times net asset value per share " was voted down by shareholders marginally last July, said Daiwa Capital Markets' analysts in a note.View of HKEX at Exchange Square, Central on 15 April 2020. Photo: Nora Tam alt=View of HKEX at Exchange Square, Central on 15 April 2020. Photo: Nora TamThe main driver of the spate of privatisations is the Hong Kong's depressed market sentiments, caught in a trade war between the world's two largest economies for almost two years, followed by anti-government protests and a coronavirus outbreak that has sent the local economy to its worst recession on record.The benchmark Hang Seng Index in Hong Kong, Asia's third-largest capital market, is trading recently at 10.4 times historical earnings while the China Enterprises Index averages 8 times. That makes Hong Kong one of the region's cheapest markets, surpassed only by the Straits Times index in Singapore and the Colombo exchange in Sri Lanka."The longer the weak market sentiment drags on, the higher the chances of success for privatisation deals," said Kenny Tang Sing-hing, chief executive officer of China Hong Kong Capital Asset, adding that companies which trade at sharp discounts to their net asset values " notably Chinese power utilities and Hong Kong rental income-reliant real estate investment firms " and those with low trading liquidity are prime targets.People seen in the reflection, as an electronic board shows the closing Hang Seng Index number in Central on 1 June 2020. Photo: Felix Wong alt=People seen in the reflection, as an electronic board shows the closing Hang Seng Index number in Central on 1 June 2020. Photo: Felix WongFuxin's shares averaged at HK$1.42 each in Hong Kong before Huadian announced its take-private plan, with 7.3 million shares changing hands on average everyday in the past year, or a mere 0.33 per cent of its issuance over 180 trading days. The stock soared by as much as 60.3 per cent to a record HK$2.42 in recent trading."Huadian is of the view that the [offer] is an excellent opportunity to realise [shareholders'] investments in the company with relatively low liquidity at a cash consideration which represents an attractive premium," Fuxin said.The offer price for each H share of HK$2.5 represents a 65.6 per cent premium over the last trading price of HK$1.51 and 82.2 per cent above the average closing prices of the last five trading days.The offer price represents 0.84 times its last year-end's net asset value per share, compared to 0.5 times of the last trading price.This article originally appeared in the South China Morning Post (SCMP), the most authoritative voice reporting on China and Asia for more than a century. For more SCMP stories, please explore the SCMP app or visit the SCMP's Facebook and Twitter pages. Copyright © 2020 South China Morning Post Publishers Ltd. All rights reserved. Copyright (c) 2020. South China Morning Post Publishers Ltd. All rights reserved.
Rick Helfenbein, Retail & Fashion Industry Consultant joins Yahoo Finance's Alexis Christoforous and Brian Sozzi to discuss Hong Kong's relationship with the United States. Helfenbein calls the city "a second home" for the fashion industry.
Hong Kong’s battered stock market enjoyed its best day in more than two months as investors shrugged off Donald Trump’s announcement from Friday, saying they had feared harsher measures from the US president. The Hang Seng index closed up 3.4 per cent on Monday despite Mr Trump saying Hong Kong would lose its special trade status from which it has benefited since its handover from the UK to China in 1997. The US president was responding to Beijing’s announcement that it planned to impose national security legislation on the city, which investors fear would in effect end its semi-autonomous status under the “one country, two systems” model that underpinned its return to China.
Investors and traders were cautiously awaiting the market reaction to the violent protests in the US, as clashes between protesters and police spread out across American cities following the killing of George Floyd at the hands of Minneapolis police
(Bloomberg) -- If the markets are any judge, U.S. President Donald Trump’s vow of “meaningful” action to strip some of Hong Kong’s trade privileges has so far proved underwhelming.Trump’s announcement in the White House’s Rose Garden on Friday didn’t provide any details or timeframe for what would come next, only that it would cover the full range of agreements between the U.S. and Hong Kong with “few exceptions.” U.S. stocks on Friday erased losses and traded little changed, with the S&P 500 Index rising 0.5% at the close in New York. Hong Kong’s Hang Seng Index on Monday saw gains of more than 3%, led by the finance sector.The risk was more evident later in the day on Monday, after Bloomberg reported that a “phase one” trade deal between the countries may be at risk after Chinese government officials told major state-run agricultural companies to pause purchases of some American farm goods including soybeans as Beijing watches for any U.S. moves on Hong Kong. S&P 500 Index futures gave up gains to trade 0.6% lower, while U.S. 10-year bonds erased declines. China Halts Some U.S. Farm Imports, Threatening Trade DealUnder the U.S.-Hong Kong Policy Act of 1992, the president is empowered to suspend the territory’s special trading privileges at any time through an executive order. The law covers the whole facet of the relationship, from trade to recognizing passports to rules that affect air travel, shipping and investment. It even allows for U.S. dollars to be freely exchanged with Hong Kong dollars, which if revoked would amount to what some analysts have called the “nuclear option.”Trump’s China Announcement Leaves Room to De-Escalate Tensions“We’re not seeing a rush for the exits at all,” Tara Joseph, president of the American Chamber of Commerce in Hong Kong, told Bloomberg Television on Monday. “What we’re seeing generally is everyone first digesting the news. And second of all looking at their footprint in Hong Kong and thinking through whether that ought to change.”While revoking the policy act completely would raise huge legal questions that could mark a major hit to global trade, here are some of the key measures affecting trade that analysts are watching for.TariffsTrump could treat Hong Kong exports with the same tariffs as the mainland. Yet the effect of this may be minimal: The territory exported $4.8 billion last year to the U.S., about 1% of what China shipped over. While Hong Kong is a major transshipment hub for Chinese goods, most of these are already taxed at mainland rates.Moreover, the U.S. enjoyed a $23 billion trade surplus with Hong Kong, the biggest in the world -- meaning Trump would potentially be throwing away a win according to his favorite metric if the city takes any reciprocal action.Stripping Hong Kong of its tariffs exemptions will damage the port, shipping services and logistic industries, Iris Pang, Chief Economist Greater China at ING Bank NV wrote in a note.“But these industries have been hurt anyway since the start of the trade war between Mainland China and the U.S.,” she wrote.Export ControlsThe U.S. allows Hong Kong to import certain sensitive goods that are prohibited from China. This includes certain dual-use technology with consumer and military applications, like carbon fiber used to make both golf clubs and missile components.Ending these privileges would make Hong Kong subject to the same export controls, including those placed on China following a deadly military assault on protesters in Tiananmen Square in 1989. While total Hong Kong imports requiring a special license from the U.S. amounted to only 1.2% of all goods in 2018, American exporters could have more paperwork to fill out on certain items.“Export bans could have a direct impact on the tech race that China and the U.S. seems to be engaged in,” according to economists at Natixis SA.Sanctions on IndividualsAn amendment to the policy act last year gives the president authority to sanction people who are responsible for undermining freedoms and autonomy in Hong Kong. The law specifically mentions blocking assets and revoking visas for people named by the president.Those could include Hong Kong and Macau Affairs Office chief Xia Baolong, the primary person in the mainland responsible for the territory; Luo Huining, who was appointed earlier this year to lead China’s Liaison Office in Hong Kong; and officials in the city possibly including Carrie Lam, the chief executive. Erick Tsang, who oversees mainland affairs in Hong Kong, said over the weekend that he wouldn’t fear any U.S. sanctions and would simply stay away from the country, the Standard reported.Sanctions on BanksU.S. lawmakers are quickly moving ahead with a bill that would penalize banks that do “significant transactions” with Chinese entities involved in suppressing Hong Kong’s freedoms. This could effectively cut those banks off from the U.S. financial system, with measures such as blocking foreign exchange transactions and dealings with American lenders or citizens.Republican Senator Pat Toomey and Democratic Senator Chris Van Hollen plan to move the bill forward this week. Given the ease with which anti-China measures have passed recently in Congress, Trump may have little choice but to sign it.Any action on this front could potentially do serious damage to China and Hong Kong’s role as an international finance center.Broader SanctionsTrump could use the 1977 International Emergency Economic Powers Act to implement much broader sanctions on China. This law, which is cited in the amendment to the U.S.-Hong Kong policy act that passed last year, gives the president wide powers to deal with any “unusual and extraordinary threat” that he deems a national emergency.Trump has already threatened to use it on a number of occasions during his presidency. He mentioned them when he threatened last year to place levies on Mexican goods as a way to force curbs on the flow of undocumented immigrants across the U.S.-Mexican border. And his administration also said in August that the legislation would give the president the authority to force American companies to leave China if Trump declared an emergency.Still, any move on this front would escalate tensions with China drastically and effectively mean the end of the “phase one” trade deal signed in January.‘Kill’ the Dollar PegOne key aspect of the U.S.-Hong Kong policy act is a provision allowing the U.S. dollar “to be freely exchanged” with the Hong Kong dollar.If he wanted to, Trump “could kill the Hong Kong dollar peg in one fell swoop,” according to Enodo Economics. Although that’s unlikely, it said, even targeted curbs to block Chinese or Hong Kong banks from the U.S. dollar clearing system would have “significant implications.”Oxford Economics is among those that think it’s unlikely the peg will fall victim to the political pressures and notes Hong Kong’s foreign exchange reserves are twice the size of the monetary base. In the event of material outflows, the Hong Kong Monetary Authority has various tools to release liquidity into the interbank system, they said.For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
Hong Kong's business community, backed by some of its famous billionaires, is upbeat on the benefits of a national security law for the city, according to an industry survey, while expressing concerns about foreign sanctions on their operations.About 61 per cent of the respondents said the law will either have a positive or no impact at all on their businesses over the long term, according to the Hong Kong General Chamber of Commerce. Some 54 per cent of them viewed the legislation as "controversial" and hence will have a negative impact on their businesses in the short term, citing foreign sanctions as their biggest concern.The chamber surveyed its 4,000-odd members last week as Beijing endorsed the legislation tailor-made for the city, of which 418 responded with answers. Since it was unveiled at the annual National People's Congress on May 21, the proposal that seeks to bypass Hong Kong's legislature has roiled the local stock market and further widened the rift in US-China ties.China has introduced a national security law for Hong Kong as it claims the anti-government protests in the financial hub endanger the country. Photo: AP Photo alt=China has introduced a national security law for Hong Kong as it claims the anti-government protests in the financial hub endanger the country. Photo: AP PhotoThe US has since determined that Hong Kong has lost its autonomy from China, and President Donald Trump has threatened to withdraw Hong Kong's special trade privileges and impose other unspecified sanctions. The Hang Seng Index jumped the most since March on Monday even as traders braced for more clarity from both sides of the controversy.The survey follows the decision by Hong Kong's second-richest man Li Ka-shing to throw his weight behind the proposed security law. More than 2,000 artists including Jackie Chan, whose industry was also upended by street protests for much of 2019, have also voiced their support for the law last week."We oppose any sanctions on Hong Kong as they will not only hurt local companies but also all international companies operating in the city," he said in a phone interview. Leung, who took up the role on May 1 after leaving HSBC, also warned that trade sanctions on Hong Kong may spread the pain overseas."If Hong Kong companies are restricted or hurt by the sanctions, their overseas trading counterparts and related parties will be hurt as a result," he said.In a Legislative Council meeting on Monday, Financial Secretary Paul Chan Mo-po repeated his belief that the national security legislation for Hong Kong and the US decision to impose sanctions on Hong Kong would have little impact on the city's economy.This article originally appeared in the South China Morning Post (SCMP), the most authoritative voice reporting on China and Asia for more than a century. For more SCMP stories, please explore the SCMP app or visit the SCMP's Facebook and Twitter pages. Copyright © 2020 South China Morning Post Publishers Ltd. All rights reserved. Copyright (c) 2020. South China Morning Post Publishers Ltd. All rights reserved.
Markets kicked off the new month in mixed fashion, as protests in major US cities over the weekend threaten the nascent post-pandemic recovery in the world’s largest economy.
Data released over the weekend by China’s National Bureau of Statistics showed factory activity in the country expanding in May.
President Donald Trump will hold a news conference later today to outline the formal U.S. response to China's move to tighten its grip on the island city of Hong Kong.
(Bloomberg) -- The struggle to maintain confidence in Hong Kong’s future is manifesting in its stock and currency markets.Waves of mainland capital are flooding into equities, especially megacap Chinese banks, countering losses sparked by sweeping national security legislation. Tension is also building in the foreign exchange market, where options and forwards show the pegged currency will reach the weak end of its trading band.Stability in financial markets would reinforce the message being promoted by officials and tycoons alike: that tougher laws on dissent will bring calm to a city wracked by violent protests. The city’s leader Carrie Lam cited gains in the Hang Seng Index on Tuesday as evidence that investors weren’t worried the new laws will undermine Hong Kong’s position as an international finance center.“China needs to deploy some funds to help stabilize the Hong Kong dollar and capital flows in the city -- that’s paramount,” said Steven Leung, executive director with UOB Kay Hian (Hong Kong) Ltd. “Some foreign investors worry the security law will threaten Hong Kong’s status as an international financial center and they might exit.”The city’s stocks need all the help they can get. The Hang Seng Index lost almost 7% this month, clocking up the biggest drop relative to the MSCI All-Country World Index since the Asian financial crisis in 1998. Short selling volume on Hong Kong’s main board climbed to 21% of total turnover Friday, the highest proportion in data going back more than two decades.The stakes are high: a panicked business community could trigger cascading outflows that crash its markets and cause runs on its banks. A wave of emigration could create a brain drain that damps its appeal as a financial center.The $4.9 trillion stock market, the world’s fourth largest, is now the most volatile since 2012, according to a measure of historical 100-day swings on the Hang Seng Index. Options traders are preparing for more turbulence: eighteen of the 20 most-owned Hang Seng Index derivatives are puts protecting against losses.While Hong Kong’s currency remains supported by tight liquidity conditions that keep its interest rates high versus those on the greenback, there are signs that some hedge funds may be changing their positions. The Hong Kong dollar’s 12-month forward points remain extremely elevated after spiking to the highest level since 1999 last week, showing demand to speculate against the currency.Local companies are lining up to defend China’s expanded powers. Hong Kong property developers issued a statement saying the national security law will guarantee stability and prosperity, even as their shares tumbled to multi-year lows. More public displays of support will likely come: Hong Kong’s former leader Leung Chun-ying exhorted people on Friday with HSBC Holdings Plc accounts to stop using them, saying the British bank had yet to express its position on the law.The city’s police chief Chris Tang added to the chorus, telling state broadcaster CCTV that the new legislation would help strengthen investor confidence in the city, according to Radio Television Hong Kong.Such efforts to calm the business community aren’t new. Back in the early 1980s, the then free-floating currency plunged as London and Beijing held talks over the return of Hong Kong to Chinese rule. The colonial government arrested the slide by pegging the Hong Kong dollar to the greenback. Maintaining confidence became an important focus for the British rulers in the run up to the 1997 handover, especially as hundreds of thousands of Hong Kongers migrated to Canada in order to obtain overseas citizenship.There is no shortage of evidence that Beijing has repeatedly intervened in its domestic stock market to maintain order during politically sensitive periods. It also has plenty of tools at its disposal to minimize moves in the currency. Such control has long dulled the appeal of Chinese assets to foreign investors.Whether the Communist Party’s tightening grip over Hong Kong will extend to the city’s free-wheeling financial markets remains to be seen. But it’s increasingly becoming clear that in Hong Kong, like on the mainland, stability is paramount.(Updates short selling data in fifth paragraph.)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
For four decades Hong Kong has thrived as a perfect middle ground between China and the US. Independent courts and free information flows made the city a base for everyone from US investment bankers advising Chinese state companies to supply chain managers dealing with low-cost factories just over the border in Guangdong province. Since Beijing’s economic reforms began in 1978, Hong Kong has played a unique role — a place where western businesses could dip their toes in the new Chinese economy and where China’s Leninist system could engage with the modern, globalised economy.
China has formally approved a plan to impose national security laws on Hong Kong, despite a US declaration that the move would signal that the city was no longer autonomous from Beijing. Mike Pompeo, US secretary of state, on Wednesday issued the Trump administration’s most serious response yet to Beijing’s plan to impose the laws. China says the laws are intended to target “splittist, subversion of state power, terrorism or interference by foreign countries or outside influences” in Hong Kong.
(Bloomberg) -- It was anything but an ordinary afternoon for Hong Kong stocks as Chinese lawmakers approved a controversial plan to impose national security legislation for the city.The Hang Seng Index plunged as much as 2.2% before erasing all its losses. A rally for Chinese companies spurred speculation that mainland-based funds were behind the gains. The gauge closed 0.7% lower.There was also speculation of intervention in the currency market, with the offshore yuan strengthening just as traders said they saw some state-run banks selling dollars. Premier Li Keqiang opened a press conference at around 4 p.m. after The National People’s Congress approved the draft decision by a vote of 2,878-1 at its annual session in Beijing.“There are signs that mainland funds are buying into big-cap Chinese firms in Hong Kong, such as financial stocks and telecom, to support the index,” said Steven Leung, executive director at Uob Kay Hian (Hong Kong) Ltd.The Trump administration on Wednesday took the significant step of saying it could no longer certify Hong Kong’s autonomy from China, which was promised before the British handed the city back in 1997. The move could trigger a range of actions by the Trump administration, from sanctions on Chinese officials to revoking the city’s special trading status with the U.S.The Hang Seng Index recouped almost all of its 2.2% loss in the first 90 minutes of the afternoon session, with Chinese firms including state-owned China Construction Bank Corp. and Industrial and Commercial Bank of China Ltd. the biggest contributors.Mainland money is flowing into Hong Kong’s stocks at an unparalleled pace this year, offering support to a market at the center of rising tensions between Beijing and Washington. Eligible investors, which can range from brokers to insurers or individuals with at least 500,000 yuan ($70,000) in their trading accounts, pumped more than $35 billion across the border, the most for the period in data going back to 2017.History shows mainland buying tends to pick up when Hong Kong shares drop. Onshore investors bought the dip in March when the Hang Seng Index fell to its lowest in more than three years. State-backed funds have also stood by to help steady Hong Kong’s markets around key political events, such as in 2017 when Xi Jinping visited the city to mark 20 years of Chinese rule.For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
Hong Kong’s Hang Seng index (HSI) is struggling to partake in the global equity rally on Thursday, considering the myriad of uncertainties that are now engulfing the city.
(Bloomberg) -- It’s only a matter of time before the Trump administration hits China over a range of grievances. The question for CEOs, investors and economic policy makers is how bad things will get.U.S. lawmakers moved on two fronts Wednesday, with Secretary of State Michael Pompeo declaring Hong Kong no longer autonomous from China and the House of Representatives authorizing sanctions against Chinese officials for abuses against Muslim minorities. Other bills in the pipeline would target Huawei Technologies Co., Chinese companies listed in the U.S. and banks that do business with Chinese officials who interfere in Hong Kong’s affairs.President Donald Trump has numerous policy options, from sanctions on officials and businesses to effectively treating Hong Kong no differently from the Chinese mainland. The worst-case scenarios have potentially massive implications, and China has vowed to strike back.MarketsInvestors have so far taken rising tensions in their stride, pushing global share prices to the highest levels since early March on optimism over unprecedented government stimulus and an easing of coronavirus lockdowns. But that doesn’t mean markets are flashing the all-clear sign.China’s yuan tested a record low in offshore trading on Wednesday, while Hong Kong’s $4.9 trillion equity market is valued at its most depressed level relative to global shares since the Asian financial crisis in 1998. Apple Inc., which is highly dependent on China’s consumers and contract manufacturers, has seen its stock lag behind the S&P 500 Index in recent weeks.“What would be most worrying to me is if the U.S. and China really turn their tensions into a full-blown financial war -- devaluing the currency, limiting funding, blocking listings,” said Li Changmin, managing director at Snowball Wealth in Guangzhou.Hong Kong’s Hang Seng Index could fall more than 10% to a nearly four-year low in the coming months if tensions escalate, said Cliff Zhao, head of strategy at CCB International Securities Ltd. While Hong Kong’s currency is near the strong end of its trading band against the dollar, speculators are betting on significant depreciation.EconomiesA return to tit-for-tat retaliation between Washington and Beijing would not only jeopardize their recent trade deal, but also spill over to the world economy at a time when it’s showing tentative signs of recovery from the biggest contraction since the Great Depression.Read more: China Is Securing Brazilian Soy With U.S. Trade Tensions RisingIf Trump decides to pursue some of his more extreme policy options for Hong Kong, both China and the U.S. could pay a heavy price. The city is a major transshipment hub, exporting HK$304 billion ($39 billion) of goods to America in 2019. Hong Kong also offers U.S. companies a relatively safe way to access the Chinese market and employs a U.S. dollar peg, linking it with America’s financial system. Some 290 U.S. companies had regional headquarters in the city as of 2018 and another 434 had regional offices, according to the Congressional Research Service.Meanwhile, China still relies on Hong Kong as its primary gateway to the global economy. About 53% of the country’s $1.18 trillion in non-financial investments flowed through Hong Kong in 2018, and China’s state-owned banks have about 7% of their assets in the city. Hundreds of China-domiciled companies have Hong Kong listings, including national leaders such as Alibaba Group Holding Ltd. and PetroChina Co. Chinese companies have raised more than $100 billion from Hong Kong share issuance since 2015, with firms including JD.com Inc. and NetEase Inc. preparing for blockbuster secondary listings next month.The threat of U.S. sanctions is likely to spur capital outflows from Hong Kong, said Tommy Wu, a senior economist at Oxford Economics. “It also raises the question as to whether foreign corporates are still willing to use Hong Kong as a regional headquarters, or if they will allow their cash or capital to sit in Hong Kong,” he said.BanksAlmost all of the world’s biggest banks and asset managers have a presence in Hong Kong, but they’re also increasingly turning to mainland China as their next big source of growth. While there’s little indication thus far that Beijing will renege on promises to open China’s domestic financial markets to foreign competition, the risk would be hard to ignore if tensions worsen.For Wall Street banks, the stakes are massive. Goldman Sachs Group Inc. has estimated that China’s brokerage industry alone will generate $47 billion of profit by 2026, with foreign securities firms seeking to grab a sizable portion. Wealth managers such as BlackRock Inc. and Vanguard Group Inc. are also jumping into the Chinese market, where assets under management are forecast by Oliver Wyman, a consultancy, to reach $30 trillion over the next few years.In one ominous sign for the industry, a body advising the U.S. Congress this week questioned Wall Street’s push into China, saying lawmakers need to “evaluate the desirability of greater U.S. participation in a financial market that remains warped by the political priorities of a strategic competitor.”Chinese banks could also become bargaining chips. Two U.S. senators are proposing legislation to punish Chinese entities involved in enforcing proposed new security laws in Hong Kong and to penalize banks that do business with those entities. The nuclear option would be to “block Chinese banks from the U.S. dollar clearing system,” though that’s unlikely at this stage, according to Enodo Economics.CompaniesNon-financial companies also have a lot to lose. When the U.S. announced further curbs on Huawei this month, Hu Xijin, the editor of the Communist Party’s Global Times newspaper, tweeted that China would retaliate using an “unreliable entities list” that it first threatened at the height of the trade war last year.While China never said which companies were on the list, the Global Times has cited a source close to the Chinese government as saying U.S. bellwethers such as Apple and Qualcomm Inc. could be targeted. Boeing Co., which recorded $5.7 billion of revenue from China in 2019, and Tesla Inc., the biggest U.S. carmaker operating independently in China, are among companies most exposed to a further souring of relations.Read more: China to Target U.S. Companies, Global Times SaysIn Hong Kong, tycoons who’ve long been viewed as being close to Beijing could be particularly vulnerable as they look for assets made cheap by the pandemic. This week, Li Ka-shing’s CK Hutchison Holdings Ltd. lost a bid to build and operate Israel’s biggest desalination plant, days after the U.S. asked the country to review potential security threats posed by China-based companies. If Trump moves to curb exports of sensitive technologies to Hong Kong, the city’s high-tech firms will also suffer, said Tianlei Huang, research analyst at the Peterson Institute for International Economics.Anyone trying to pick stocks in China and Hong Kong would do well to stick with companies that are more geared toward the domestic market -- like Alibaba and Tencent Holdings Ltd. -- and avoid businesses exposed to U.S.-China wrangling over semiconductors and the technology supply chain, according to Alvin Cheung, associate director with Prudential Brokerage Ltd. in Hong Kong.“Sino-U.S. relations will likely remain difficult before the U.S. presidential election and Hong Kong will be caught in the middle of that spat,” Cheung said. “It’s going to be a bumpy road ahead and investors should prepare themselves for huge volatility.”For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
Wall Street stocks were edging towards a fourth straight daily gain on Thursday, with the technology sector shrugging off the Trump administration’s threat of a social media clampdown as growth stocks returned to favour. Twitter, Facebook and Google owner Alphabet all moved higher even after the White House said President Donald Trump would on Thursday sign an executive order tightening restrictions on social networks. The year-to-date’s top-performing stocks had been laggards in the rally of recent days as investors switched into those more exposed to an economic recovery, helped by optimism about an easing of lockdown restrictions and a proposed EU recovery fund.
May.27 -- Vincent Kwan, chief executive officer at Hang Seng Indexes Co. Ltd., discusses the Hang Seng including dual-class shares in its benchmarks and the overall revamp of the index. He speaks on “Bloomberg Markets: China Open.”
(Bloomberg) -- Small groups of protesters remained on Hong Kong’s streets Wednesday evening, after officers fired pepper spray projectiles and arrested more than 300 people in a return to unrest largely unseen since last year.Hundreds gathered to demonstrate at lunchtime in the central shopping hub Causeway Bay to oppose China’s increasing control over the city, while protesters tried to block roads in the city’s Mong Kong district later in the afternoon. Student groups and trade unions had called for protests to oppose several pieces of China-backed legislation, including a bill that would criminalize disrespect toward the Chinese national anthem and Beijing’s plan to impose sweeping new national security measures.What Are the New Laws China Is Pushing for Hong Kong?: QuickTakeKey Developments:Police arrest upwards of 300 demonstrators WednesdayAnthem bill gets second reading at legislatureOfficers fire pepper-spray projectilesHundreds gather in Causeway Bay, CentralTycoon Li Ka-shing defends security lawHere’s the latest (all times local):Arrests for unlawful assembly in Mong Kok (8:50 p.m.)Police arrested more than 60 people in Hong Kong’s Mong Kok district on unlawful assembly charges, the government said in a statement. Local television reports showed protesters blocking roads and starting small fires, which were quickly doused by the emergency services.Police say hundreds arrested during day of protest (5:30 p.m.)More than 300 people have been arrested for offenses including possession of weapons and participating in unauthorized and illegal assemblies, Hong Kong’s police force said in a Facebook post.Dozens of protesters remain in Causeway Bay (5 p.m.)Most demonstrators had left Hong Kong’s streets as evening fell. Some 100-200 protesters remained chanting in Causeway Bay, while small groups of protesters in the Mong Kok area of Kowloon, a hotbed for past rallies, were chased by police after marching toward them holding umbrellas.Second reading of anthem bill (3 p.m.)The second reading of the national anthem bill was underway in the legislature, after Legislative Council president Andrew Leung dismissed three pro-democracy lawmakers’ proposals to adjourn the meeting. He also ruled out any further adjournment proposals.Taiwan Foreign Minister concerned over China’s actions in Hong Kong (2:20 p.m.)Taiwan is concerned about China’s plans for national security law in Hong Kong, Foreign Minister Joseph Wu said in an interview with Fox News. The Chinese government is taking advantage of the situation while everybody is busy dealing with coronavirus pandemic, Wu said.If China imposes national security legislation in Hong Kong, “we don’t know what’s going to happen next. It might be Taiwan,” he said, adding that Taipei was concerned China might take military action against the democratic island.Protesters on Hennessy Road disperse (1:55 p.m.)Demonstrators who had occupied the central thoroughfare left after police arrived on the scene. Another group of riot officers was seen leaving police headquarters in the direction of the Wan Chai and Causeway Bay areas. Meanwhile, water barricades stood outside the Agricultural Bank of China’s Hong Kong headquarters in Central.Police use pepper spray projectiles in Central (1:30 p.m.)Officers fired pepper spray pellets to the ground to warn lunchtime protesters gathered on Pedder Street in Hong Kong’s Central district, local media reported, close to luxury malls and office buildings. Phalanxes of riot police kept watch on protesters there and outside Hysan Place, a busy shopping center in Causeway Bay.‘There have been concerns today about whether to come out’ (1 p.m.)Hundreds of people demonstrated around Hysan Place and others on Pedder Street, both popular with protesters last year. A 24-year-old woman who identified herself as Ms. Lee and works in the social work industry posted a black banner reading “Hong Kong Independence” at Hysan.“Both the national anthem and the national security laws are white terror to Hong Kong citizens,” she said. “We have seen a lot of pro-democracy activists being arrested in China and I don’t want Hong Kong to turn into this in the future.”“There have been concerns today about whether to come out protesting given the heavy police presence and what the movement can be achieved,” she added. “I think we are a bit lost over what’s the next action can be. But I am here to fight for the independence of Hong Kong, even though I know the chance is low, but I will try my very best till the end.”Police make numerous arrests, discover petrol bombs (12:30 p.m.)Hong Kong’s police force arrested at least 16 people across the city as of 11:30 a.m., according to a statement on Facebook.The suspects were arrested for offenses including possession of weapons and dangerous driving, as protesters had called on people to disrupt traffic on arterial roads and key cross-harbor tunnels by deliberately driving slowly. Three vehicles were also towed away. Police said they also discovered petrol bombs and hammers as part of their morning searches and patrols.Ip says Chinese security agencies to help with intelligence (11:45 a.m.)Chinese national security organizations operating in Hong Kong will have to abide by city laws, but will likely help local law enforcement with intelligence gathering, said Regina Ip, a pro-establishment lawmaker who previously served as Hong Kong’s security secretary between 1998 and 2003.“The Hong Kong administration will have to be consulted, and the people in Hong Kong will have to comply with Hong Kong laws,” said Ip, who is a current member of Hong Kong Chief Executive Carrie Lam’s advisory Executive Council. “If such agencies are to be established, the main responsibilities would be to supplement the deficiencies of our Hong Kong police force, which is in the area of intelligence collection and analysis.”Cheung says he hopes progress will be made on anthem bill (11:30 a.m.)Ahead of a meeting of the city’s Legislative Council, Hong Kong’s No. 2 official, Chief Secretary Matthew Cheung, told reporters he hopes progress will be made on the national anthem bill today, saying the bill has nothing to do with freedoms or human rights.Meanwhile, after being largely shut out from the Legco area by a police security cordon around the city’s legislature, protesters have taken to the Hysan Place shopping mall in Causeway Bay, shouting slogans including “Hong Kong independence, the only way out!”Li Ka-shing defends security legislation (11:19 a.m.)Billionaire Li Ka-shing, Hong Kong’s wealthiest tycoon, has defended China’s dramatic move to implement new national security legislation in Hong Kong.“It is within each and every nation’s sovereign right to address its national security concerns,” he said in a statement. “We probably need not over-interpret it. Hopefully the proposed new law can allay concerns the central government has in Hong Kong and give rise to a positive outlook from there.”He said there’s no need to overthink the legislation, and that the Hong Kong government must try and maintain trust in the “one country, two systems” principle under which China governs the former British colony.Beijing ‘wants to start a precedent,’ Martin Lee says (9:25 a.m.)The move to impose a national security law is part of a broader attempt to establish a legal precedent that would allow Beijing to force more laws on Hong Kong in the future, Martin Lee, a prominent pro-democracy figure who helped draft the city’s constitution, told Bloomberg Television in an interview. That could even include reviving the extradition bill that sparked protests last year, allowing Beijing to take people from Hong Kong and try them in mainland China’s Communist Party-controlled courts, he said.“Beijing wants to legislate for Hong Kong and start a precedent,” he said. “The next thing they could legislate is the extradition bill. Once that is passed, they could come to our courts and present some documents, present some trumped up charges, and we’d be transferred to Beijing.” Lee added that he hoped the international community would take action.“I call this the rape of Hong Kong. They are raping the Hong Kong system,” Lee said.For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
Mid-week market drivers with Dukascopy TV. We’ve got COVID-19 news and numbers, U.S – China tension, and optimism towards the economic.