The new week got off to an inauspicious start on Monday as violence in Hong Kong and doubts about the trade deal undermined previously ebullient investor sentiment.
Pro-democracy demonstrations had already taken a turn for the tragic with the death of a protester last week, and now, another protester is in intensive care after being shot at close range by a police officer.
The incident was caught on video, and as you can imagine, it went viral quickly, serving as the impetus for more demonstrations.
As of last week, the Hang Seng was up more than 10% off the lows hit in August.
The rally had taken Hong Kong shares into overbought territory for the first time since April, with investors generally content to ignore the unrest and the economic swoon the protests have spawned.
The music stopped on Monday, though. The Hang Seng suffered its fourth-worst day of 2019 amid the violence, falling more than 2.6%.
The HSI volatility index logged one of its biggest one-day spikes of the year.
Local police were forced to dispel what authorities characterized as “malicious” rumors about an order to fire “at will” on protesters. One officer was suspended for driving a motorcycle into a crowd.
Dozens were detained over the weekend as shops were ransacked, roads were barricaded and Molotov cocktails were thrown. Among other things, protesters are now demanding full suffrage. Suffice to say that is never going to happen, something both China and Carrie Lam reiterated in the most explicit terms imaginable.
The worse things get, the more pressure the White House will feel from Capitol Hill. Lawmakers last month passed a series of measures in support of the demonstrators. Beijing did not take kindly to the gesture and Donald Trump is reluctant to take sides for fear of undercutting the trade deal. Earlier this year, during a phone call with Xi, the US president is said to have promised to stay largely silent on the issue.
Hong Kong sank into a recession in the third quarter and feeble attempts to explain why a rebound may be materializing aside, the outlook is clearly deteriorating.
The latest read on the IHS Markit PMI for the city was 39.3. The renewed dip in November suggests there is no light visible at the end of this tunnel. What you see in the visual below is the worst print since November of 2008. Output dropped to 32.3, the lowest reading ever.
Later on Monday, a video showing a man being lit on fire after having some manner of fuel thrown on his clothes started making the rounds. Global Times editor Hu Xijin shared the clip and claimed the man was in “open disagreement” with the protesters.
He then accused the demonstrators of “starting to behave like ISIS members”.
Hu, you’re reminded, tweets on behalf of the Party.
Monday in Hong Kong, a man who openly disagreed with radical protesters was poured gasoline over by rioters and set on fire. Radical protesters in Hong Kong have started behaving like ISIS members. pic.twitter.com/Hugh5ymnr7
— Hu Xijin èƒ¡é”¡è¿› (@HuXijin_GT) November 11, 2019