HK can keep markets calm
City has reserves to deal with volatility: observers
Hong Kong’s financial markets are only marginally affected by simmering tensions between the world’s top two economies, observers said, predicting stability in the city’s stock market and its pegged currency.
Even in case of extreme situations, the Hong Kong Special Administrative Region (HKSAR) is considered to have sufficient ammunition to ensure local market tranquility.
The Hang Seng Index, a benchmark for blue-chips traded on the Hong Kong market, closed up 1.37 percent to 24,325.62 points on Wednesday, extending its winning streak to a third session.
The benchmark’s gain for the month so far almost recovered its losses in May amid concerns over US sanctions on Hong Kong in the wake of national security legislation for the city.
US President Donald Trump announced at a news conference on China on Friday that his administration would begin revoking Hong Kong’s customs and trade privileges, as part of his threats aimed at shifting attention away from the US government’s failed response to the coronavirus pandemic and the mounting furor in American cities over the death of an unarmed black man.
Trump’s ranting, however, rallied Chinese shares instead of hammering them.
Seven out of the 10 largest constituents of the Hang Seng Index are Chinese mainland companies with little exposure to international trade, said Raymond Deng, investment strategist CIO for consumer investment and insurance products at Singapore-based DBS Bank.
Furthermore, a majority of companies listed on the Hong Kong market are based in Chinese mainland or rely on the mainland market for their main businesses, meaning that the local equity market isn’t much affected by global trade headwinds, Deng told the Global Times on Wednesday.
The Hang Seng China Enterprises Index, a benchmark to gauge the performance of mainland-based companies’ securities listed in Hong Kong, has fared better than the Hang Seng Index.
In a sign that the resilience of the national economy is injecting confidence into the HKSAR’s stock market, Hong Kong-listed Wuling Motors was up 120 percent intraday on Wednesday on news of its launch of a display van to capitalize on the nation’s push for street vending.
As for the Hong Kong dollar, with a trading band of 7.75–7.85 against the US dollar under the Linked Exchange Rate System (LERS), there is little room for local currency weakness to emerge, analysts said.
The Hong Kong dollar has actually shown strength against the US dollar, hovering around at 7.75 per US dollar lately – the strong end of the spectrum, Deng said.