
Hong Kong violence rattles investors, stocks drop
- The months-long violence in Hong Kong has been shaking the investment arena both locally and globally
- The pro-democracy protests escalated when a protestor was shot and wounded by the Hong Kong police
- Investors have been abandoning risky assets and currencies and investing in safe-haven such as gold
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Last Monday shares around the world dipped as a result of the
rising violence in one of South Asia’s vibrant economies, Hong Kong. The tension
in the region has been pressuring Asian stocks, with Monday marking one
of the worst lows since August, instantly boosting demand for safe-haven assets such
as the yen and gold.
The pro-democracy protests
are getting out of hand after a protestor was recently shot and wounded by Hong
Kong police during the city-wide protests.
The global
MSCI equity index recorded a 0.2% drop, with Hong Kong’s index Hang Seng
registering a 2.6% drop across Asia. The MSCI world equity index which tracks
stocks in 47 countries, saw its widest index of Asia-Pacific shares outside
Japan fall 1.2% from a record six months high to its worst trading day in since
August.
But the nerves
seem to be spreading to other parts of the world too, including Europe.
The Euro
STOXX 600 dropped 0.4% with London stocks falling 1.1%. And Wall Street futures
weren’t spared either, recording a 0.4% loss.
Key industry
stakeholders believe that the ongoing Hong Kong protests are bound to further
make the markets nervous, even as protestors remain keen on bringing to an end what
they term as ‘perennial’ police brutality and meddling by Beijing in the affairs
of the former British colony turned autonomous territory.
“At
some stage, I think it is likely that there will be a more fully-fledged
crackdown,” Stéphane Barbier de la Serre, a strategist from Makor Capital
Markets said.
“And
if you see a crackdown, you could see markets collapsing.”
Following
the months-long stalemate, investors have been abandoning currencies believed
to be risky and instead scampering for safe-haven assets. As a result, gold
prices jumped 0.5% to reach $1,465.36
per ounce after a three-months low.
On currencies, the Chinese yuan fell 0.3% to 7% to the dollar
in offshore transactions. The Japanese yen, which thrives during global economic
or political turmoil, strengthened 0.3% against the dollar.
However, the sterling jumped 0.3% against the dollar after it
became apparent that Britain had dodged a possible recession. Still, the gain represented
the slowest growth rate experienced in a decade. The sterling was last trading
against the dollar at $1.29.
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