Things have reached something of a boiling point in Hong Kong and that looks to weigh on risk sentiment to start the week following an Asian session where multiple markets were on holiday.
Hong Kong canceled all remaining flights on Monday as protesters snarled the terminal building, in what’s widely billed as the most serious disruption to date. Despite the fact that the extradition bill which sparked the protests was all but pulled on June 15, the clashes have continued, turning violent and targeting public transportation. The genie is out of the bottle.
Beijing is (still) not amused. “[Protesters] exhibited sings of terrorism” a spokesman for China’s Hong Kong and Macau Affairs Office said Monday, adding that “all those who care about Hong Kong’s future should come out and stand against all criminal acts and perpetrators of violence”.
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Last Wednesday, the incorrigible Hua Chunying (a spokeswoman for China’s Ministry of Foreign Affairs) was back to accusing the US of fomenting the discord. After noting that Beijing continues to support Hong Kong Chief Executive Carrie Lam, Hua demanded that “some individuals in the US” cease interfering in Hong Kong’s affairs.
That marked at least the fourth time that Hua has accused the US (and specifically Mike Pompeo) of playing a role in the Hong Kong protests.
Also last week, a local broadcaster cited central government “studies” which purportedly show that some 1,000 “foreign-backed radicals” played a part in the recent turmoil.
US equity futures took a header when Hong Kong announced that it was canceling all remaining flights. (There was a torrent of Hong Kong-related news flow around the same time.)
Shares of Cathay Pacific plunged nearly 5% to their lowest since mid-2009 after Beijing punished its employees for participation in the protests, putting the carrier in an awkward position that could jeopardize not only flights to the mainland, but also its flights over the mainland.
According to Hong Kong police, nearly 150 protesters were arrested over the weekend. Two rounds of rubber bullets were fired and one round of tear gas was deployed.
The turmoil is now casting serious doubt on the prospects for Hong Kong’s economy. Some analysts now see growth at risk of flatlining. The city’s equity markets have come under enormous pressure as the combination of political unrest, the trade war and a prospective sharp economic deceleration darken the outlook.
Hong Kong stocks logged their longest losing streak since 1984 last week, when the MSCI gauge fell for a tenth consecutive session.
On Monday, the Global Times said the Chinese People’s Armed Police are assembling in Shenzhen in preparation for “large-scale exercises”.
Draw your own conclusions.