Protests in Hong Kong that have persisted for the past two months could eventually deliver a more lasting blow to U.S. and global markets, market strategists and geopolitical experts told MarketWatch.
Under the terms of its postcolonial constitution, Hong Kong was intended to operate with a high degree of autonomy from China: This relationship is described as “one country, two systems,” and has “signified that Hong Kong enjoys its own autonomous ‘system’ within the larger system of the nation as a whole,” explained Suzanne Pepper, a Hong Kong-based writer in a March blog post.
The Hong Kong Hang Seng HSI, -1.54% slipped 0.4% on Monday and is down 7% so far in August and nearly 10% over the past three months, according to FactSet data. The exchange traded iShares MSCI Hong Kong ETF EWH, -3.14%, one of the most popular funds used to gain exposure to Hong Kong stocks, was down 3.2% in Monday and has fallen 9.5% so far in August and 12.4% over the past 90 days.
Market participants say that heightened tensions or a bloody clash could roil global markets because Hong Kong is seen as a financial hub and problems in the region could also stall any chance of a near-term Sino-American trade resolution. “The big fear is that Beijing could respond with force of the kind seared into memories about Tiananmen Square. If so, assessments of the Politburo would also have to be revised to stand at a more pessimistic view. In turn, markets would have to become less hopeful of the degree and speed of progress possible on a whole host of fronts, including trade,” Ken Odeluga, market analyst at City Index told MarketWatch.
Sorry, wishful thinking on your part. Not gonna happen.
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