HK dollar, stocks retreat amid protest crackdown

People walk past an electronic ticker showing Hong Kong’s benchmark Hang Seng Index dropping more than 500 points soon after opening yesterday

Hong Kong’s stocks fell the most in almost three weeks, the city’s currency weakened and equity-market volatility surged amid the biggest police crackdown on protesters since the city returned to Chinese rule.
The benchmark Hang Seng Index sank 1.9 percent to 23,229.21 at the close in Hong Kong, its biggest loss since Sept. 10, as developers and retailers tumbled. A gauge of stock volatility jumped 24 percent, the steepest surge in three years. The city’s currency slid to a six-month low and one-year interest-rate swaps climbed the most in 15 months.
Pro-democracy protesters vowed to press ahead with demonstrations unless Hong Kong’s top official steps down. Rallies in the shopping neighborhoods of Causeway Bay and Mong Kok are picking up after a lull in the morning, leading banks to shut branches and deterring tourists.
“In terms of sentiment the market is likely to remain very cautious,” said Tai Hui, chief Asia market strategist at JPMorgan Asset Management, which oversees about USD1.7 trillion worldwide. “This is a very unusual situation for Hong Kong. In the short term there’s going to be shock to the markets but it’s still more important to look at aspects such as fundamentals and valuations.”
The showdown adds to concerns about falling retail sales and rising U.S. interest rates that fueled a 6.5 percent drop in the Hang Seng Index from this year’s high on Sept. 3 through last week.
“We expect the battleground atmosphere on Hong Kong’s streets to add to the drag on retail sales in September,” Tim Condon, Singapore-based head of Asian research at ING Groep NV, wrote in a note to clients.
Retailers and tourism-related companies may be among the most affected on speculation protests will deter mainland tourists from visiting during National Day holidays that begin Oct. 1, said Gavin Parry, managing director of Hong Kong-based brokerage Parry International Trading Ltd. Financial shares in the $3.7 trillion market may also come under pressure, said Ronald Wan, the chief China adviser at Asian Capital Holdings Ltd. in Hong Kong.
HSBC Holdings Plc was the biggest drag on the Hang Seng Index, falling 1.8 percent. Luk Fook Holdings International Ltd., which sells jewelry, sank 4.8 percent. Hong Kong Exchanges & Clearing Ltd. tumbled 3.2 percent. Kana Nishizawa, Weiyi Lim and Fion Li, AP