Hong Kong, Mainland Shares Under Siege Amid Violence, Yuan Drop

Asian stocks suffered mightily to start the week, as Donald Trump’s comments about an apparently make-believe phone call with top Chinese officials came too late to save regional shares, which logged outsized losses on Monday.

The Hang Seng was hit especially hard, and fell more than 3.5% at one juncture as investors continue to fret over the prospect of intervention in the city by Beijing after protests turned violent again over the weekend.

Thanks in part to upbeat comments from Chinese Vice Premier Liu He on trade, the Hang Seng pared some losses, but still closed 2% lower, imperiling a feeble bounce.

The PBoC’s yuan fix suggested Beijing wasn’t keen to throw gasoline on a raging fire Monday, and will, for now anyway, keep the currency some semblance of stable. Still, the more shrill the rhetoric from Trump, the less inclined China will be to play “fair”.

Hong Kong police on Monday said a total of 86 people were arrested over the weekend in connection with the protests. 32 were detained on Saturday, including 22 men and 10 women ages 16-52. On Sunday, 45 men and 9 women were arrested. A 12-year-old boy was hospitalized.

State media appeared to suggest that Beijing is closer than ever to intervening. “It’s not only China central government’s authority but also its responsibility to intervene when riots take place in Hong Kong”, Xinhua said in a Sunday “commentary”. The reference is to Deng Xiaoping, who said Beijing is obliged to act under these types of circumstances.

Hong Kong said exports fell less than expected in July, although imports declined 8.7% YoY last month. That was more than the -8.3% estimate from a half-dozen economists.

The offshore yuan dropped more than 0.3% on Monday, but at 7.156, is well off its worst levels seen in early Asian trading.

Some traders said Beijing was active stabilizing the currency. Large Chinese banks were observed selling dollars around 7.1450.


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