Hong Kong Is Center Of Geopolitical Universe As Hang Seng Turns 50

“Some US politicians have gone into a frenzy to do whatever to curtail and contain China, by fair means or foul”, a truly hilarious People’s Daily commentary published Sunday reads.

The piece – called “Using Hong Kong to contain China’s development is a daydream” – is overwrought even by Chinese state media standards.

“Their evil hope is that Hong Kong will go down in chaos and become a card in their hands”, the Party mouthpiece continues. Then there’s this bit:

Some politicians in the United States support the bloody, cruel, devastating, annihilation of humanity. They continue to support the violent criminals, hypocrisy and cold blood. The more chaotic the order in Hong Kong, the more energetic they are; the more violence there is in Hong Kong, the more excited they are. 

It’s impossible to read with a straight face, but once you get past the abject absurdity, you’re left to again ponder the prospect of the trade deal falling apart over the Hong Kong bill which, irrespective of Donald Tump’s support, will become law (the legislation has a theoretical veto-proof majority on the Hill).

Read more: On Hong Kong, Trump Irritates Everyone

If he doesn’t want to suffer the humiliation of sending the bill back to Congress and being rebuked, Trump can do nothing, in which case the legislation will become law in 10 days.

On Sunday, Hong Kong’s district council elections saw record turnout. Nearly 3 million people voted, around 70% of the city’s electorate. That smashed the previous record of 1.5 million. Not surprisingly, pro-democracy candidates made big gains, grabbing more than half of the 452 contested seats. The protests abated to allow for the elections to proceed uninterrupted.

A simplistic read is that the results will ratchet up the pressure on Carrie Lam. By 7 AM, pro-establishment candidates had won just 42 seats. It was, in short, a landslide.

“Although the district councils handle local matters and have no direct say over the chief executive’s programme, the elections were seen as a barometer of support either for the anti-government protest movement or for the embattled leader and her handling of the roiling unrest”, SCMP notes, adding that “the thrashing suffered by the pro-Beijing camp would appear [to make] Lam’s position even more difficult, even as she herself on Sunday tried to frame the elections to be one about district council matters”.

This could inject some excitement into what otherwise might be a subdued week as the US gears up for Thanksgiving.

“Two-way risks on US-China headlines and a lack of new signals from global data and monetary policies are likely to keep market conviction low, reinforcing markets’ wait-and-watch approach”, Barclays said Sunday, adding that “this behavior is manifesting in low cross asset correlations [while] absorption ratio, our measure of macro market conviction and co-movement across markets, has reached its year lows and is reflecting in low G10 FX volatility”. The following visuals show the bank’s projections for the offshore yuan and their model-based expectations for a full-fledged US-China trade deal, respectively.

(Barclays)

Over the weekend, Chinese State Councillor Wang Yi delivered a series of irritated remarks aimed at the Trump administration, which he called  “the world’s biggest destabilizing factor”. The US Congress, Wang said, is “crudely” interfering in China’s internal affairs in a nefarious effort to undermine “one country, two systems” and stoke instability in Hong Kong.

At the same time, both sides are keen to preserve the pretense that the Hong Kong situation can be separated from the trade deal. China appeared to deliver an olive branch via a lengthy decree on intellectual property protection.

But officials now say a “Phase Two” deal is unlikely to happen prior to the US election, if it happens at all. “Officials in Beijing say they don’t anticipate sitting down to discuss a phase two deal, in part because they want to wait to see if Trump wins a second term”, Reuters says, quoting a Chinese official as follows: “It’s Trump who wants to sign these deals, not us. We can wait”.

Amusingly, Sunday marks 50 years since the debut of the Hang Seng. You might say it’s done well.

As Bloomberg wrote late last week, “[since 1969] its constituents have evolved from local firms to an embrace of mainland Chinese names that now account for more than half of its market value”.