HK investors shrug off security law

In the streets of Hong Kong, activists protest against China’s new security law. But in the trading rooms of Asia’s dominant financial hub, investors are cheering the mainland’s embrace.

Hong Kong markets will benefit from more listings by Chinese companies, more mainland money, and more financial links with the world’s second-biggest economy, traders and analysts say, despite legislation some fear will erode the city’s freedoms.

Beijing unveiled the law on Tuesday, and the first arrests of protesters under the legislation came on Wednesday.

But the street chaos did not spill onto Hong Kong’s stock market when it reopened last Thursday after a public holiday, and the gains continued on Friday.

“As long as Chinese companies come and list in Hong Kong, the party will go on,” said Francis Lun, CEO of Geo Securities Hong Kong.

“Finance people are just obsessed with making money. Nothing can deter them from their only goal in life,” he added, saying the finance industry was “living in a parallel universe” compared with “democracy fighters”.

However, investors’ view of the law could change eventually if questions over Hong Kong’s judicial and political independence force expats and businesses to leave.

Markets had been bracing for some impact, causing the Hang Seng to underperform. It rose 3.5% in the last quarter, compared with 8.5% for Chinese shares and 18% for the MSCI ex Japan.

If there is a correction in the Hang Seng, it will mainly reflect a fragile economy and weak corporate earnings, said Linus Yip, Hong Kong-based chief strategist at First Shanghai Securities.

Washington’s moves to revoke Hong Kong’s special treatment under US law will have limited impact, most analysts say, while closer economic ties with China will benefit the city.

“The more interesting thing is US restrictions forcing Chinese companies to list in Hong Kong, that’s only going to continue, which will be phenomenal for the Hong Kong stock market and the Hong Kong exchange,” said Kay Van-Petersen, global macro strategist at Saxo Capital Markets in Singapore.

Song Seng Wun, an economist at CIMB Private Bank in Singapore, said a fresh wave of secondary listings in Hong Kong by big Chinese firms was drawing massive amounts of cash.

“Nothing pulls people more than if they can make money,” he said.