The “shocking” plunge in the Chinese yuan and rampant speculation about Beijing’s intentions when it comes to future purchases of US agricultural goods catalyzed a rout in Asian shares to start the week.
In Hong Kong, the situation was exacerbated by ongoing protests which, at this point, seem to suggest the city has decided the time to stand up to Beijing is now.
The Hang Seng plunged nearly 3% on the session, almost erasing this year’s gains.
The gauge is riding a horrendous four-day losing streak and has fallen in six of the last seven sessions. At the peak on Monday, the HSI volatility index basically hit its highest level of 2019.
The MSCI Hong Kong came into Monday riding an 8-day losing streak.
The index dove more than 3% to start the week. The gauge’s now nine-day run of losses is the longest since 1997.
The protests present a fresh threat to the city’s economy and the PMI sank to the lowest since 2009 in July, data out Monday showed.
“Hong Kong’s private sector faced an increasingly gloomy outlook at the start of the third quarter, with latest IHS Markit PMI data showing the deepest deterioration in business conditions since the heights of the global financial crisis”, Bernard Aw, Principal Economist at IHS Markit, said. “The rate of decline in both new orders and business activity was the steepest for over a decade, reflecting worsening demand conditions brought on by an ongoing US-China trade war and an escalation in large-scale political protests in Hong Kong”.
One person who spoke to Bloomberg said 26,762 (the June low) on the Hang Seng was crucial.
“If we closed below this level, I think quite a few investors would sell, including us. That’s the last straw”, VC Asset Management’s Louis Tse said, adding that “if that level can’t provide a support, I think Hang Seng would go down further — much further. I can’t see where the bottom is”.
Well, thanks to Monday’s purge, we’re through that level – and then some.