Hang Seng Index Falls To Five-Week Low Amid Lowered Trading Sentiments

Hang Seng Index
Chief Executive Carrie Lam and Secretary for Security John Lee Ka-chiu attend a news conference in Hong Kong (Photo: Reuters / Tyrone Siu)

Extradition protests in Hong Kong escalated over the weekend, sending the city's Hang Seng Index to its lowest point in over five weeks. Protesters continue to rally across the streets, further worsening trading sentiments within the city's equities markets. 

According to local media reports, several participants from both sides have been injured, but fortunately no casualties have been reported. Hong Kong's Chief Executive Carrie Lam has publicly condemned the rallies. Lam stated in an interview that the rallies are unacceptable and the behavior from people living in a civilized society is unbecoming. Hong Kong still backs the extradition proposal and has promised that it will include human rights safeguards and other similar measures to appease the public's concerns. 

Investors in the country were quick to cash out their profits leading up to the protests. This resulted in a massive drop in the Hang Seng Index, which fell by 1.7 percent to 27,308.46 in just one day. This was the biggest drop since the index plunged by 2.4 percent on May 9 following the escalation of the trade war between China and the United States.

The drop in the equities market in Hong Kong also reverberated in Mainland China's two major exchanges. The Shanghai Composite Index dropped by 0.6 percent, while Shenzhen's bourse fell by 0.6 percent.

The rally in Hong Kong, which started on Sunday, reportedly attracted more than 1 million protesters. However, police officials revealed that they estimated that there may have been around 240,000 active protesters during the rally. The rally was organized to oppose the city's proposed extradition bill. It was the biggest demonstration on the streets of Hong Kong since the city was handed over to China by the United Kingdom in 1997.

The various demonstrations are really not helping in improving investor confidence in the city's equities market. The events that have transpired are reminiscent of the massive Occupy Movement protests in 2014, which had sent the Hang Seng Index down by 4.2 percent. These types of rallies also do have a negative effect on the island's economy as hotels, restaurants, and small businesses lose revenue due to blocked roads and lesser foot traffic.

During the rally, major banks such as HSBC, Citi Bank, and Standard Chartered closed down most of their branches that were located close to the rally points. This sent financial services down as investors feared for the worst. Real estate stocks soon followed as major developers postponed their planned events and sales launches. Trading sentiments in Hong Kong were further exacerbated by the rallies, after having already suffered from the escalating trade tensions between China and the United States. 

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