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Global Times

Experts warn of broader, lasting economic damage as HK stocks plunge amid unrest

Global Times

By Xie Jun and Wang Yi Source:Global Times Published: 2019/8/5 19:43:41

Experts warn of broader, lasting economic damage

Hong Kong's equity markets plummeted on Monday as civil unrest raged in the region and showed signs of escalation. One stock expert warned that Hong Kong's economy will be "trapped in a vicious circle" if the situation worsens.

The Hang Seng Index slipped 2.85 percent to 26,151 points on Monday, the fourth consecutive day of losses. Nearly 60 companies listed on the Hong Kong bourse fell by more than 10 percent, with energy shares leading the decline.

"The Hong Kong stock market's downturn was largely caused by the chaotic and increasingly violent protests in Hong Kong in the past two months," Yang Delong, chief economist at Shenzhen-based First Seafront Fund Management Co, told the Global Times on Monday.

Li Daxiao, chief economist at Shenzhen-based Yingda Securities, said that the plunge in Hong Kong's stock market was "obviously abnormal." "It's quite a departure from Hong Kong's economic fundamentals," Li said.

The experts warned that Hong Kong's economy might weaken further if the disruptions go on. "If violent protesters in Hong Kong continue their arbitrary behavior and ruin social order, the city's economy, which largely relies on the financial and trade sectors, will be trapped in a vicious circle, and residents' living standard will be hurt," Yang said.

Li also warned that if the violent Hong Kong protesters continue to hurt society, all support from the Chinese mainland would be "in vain" and Hong Kong's financial and economical status would be lost.

The city was again plunged into chaos over the weekend as thousands of protesters occupied a major downtown shopping district. The skirmishes between protesters and local police also intensified.

Hong Kong Chief Executive Carrie Lam said Monday during a press conference that Hong Kong, which is "full of bullying and maltreatment," is on the verge of a "very dangerous situation."

The months-long protests across Hong Kong have also negatively affected the city's economy, said Paul Chan Mo-po, Hong Kong's financial secretary.

Experts have noted that Hong Kong's economy is quite reliant upon support from the mainland, and Hong Kong must strengthen cooperation with the mainland for its economic superiority to manifest further.

"The mainland provides great support for Hong Kong's stock market and economy. More than half of the companies in Hong Kong's stock market are from the mainland, including many outstanding industry bellwethers," Li said.

News released by the Shanghai Stock Exchange on Friday showed that stock exchange operators in Hong Kong, Shanghai and Shenzhen agreed on conditions that will allow mainland investors to trade Hong Kong-listed dual-class shares through the stock connect programs.

This move will prompt more capital to flow from the mainland to Hong Kong, especially in such cases as mainland-based, Hong Kong-listed technology enterprises like Meituan and Xiaomi, Li said.

"As mainland authorities relax investment limits for the Hong Kong stock market, investments from the mainland will stabilize Hong Kong's stock market, " he noted.

"What Hong Kong urgently needs is to restore peace and social order. Only when Hong Kong maintains solidarity with the mainland can it make the best use of beneficial policies like the Guangdong-Hong Kong-Macao Greater Bay Area plan and realize another economic takeoff," Li told the Global Times.

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