Hong Kong stocks drop after protesters shut airport

The Hang Seng China Enterprises Index of Chinese firms has lost 16% since its April high, not far from entering a technical bear market. (Reuters pic) 

HONG KONG: Hong Kong’s financial markets are under renewed pressure after protesters brought the city’s airport to a standstill Monday, highlighting the economic fallout from increasingly violent protests.

The Hang Seng Index fell 1.1% in pre-market trade Tuesday.

Protesters swarmed the airport Monday, causing the biggest disruption yet to the city since the unrest began in June.

The Hang Seng China Enterprises Index of Chinese firms has lost 16% since its April high, not far from entering a technical bear market.

The threat from the trade war and weeks of local unrest is already showing in the property market, as well as tourist numbers, hotel occupancy and retail sales.

A weak yuan is another cause for concern, as it will damp spending from mainland visitors and pressure earnings for firms that rely on China.

Profits for members of the Hang Seng Index are forecast to drop the most since the global financial crisis this year, data compiled by Bloomberg show.

“It looks like the situation will get worse,” said Airy Lau, investment director at Fair Capital Management Ltd. “Together with the higher global recession risk from US-China friction, the Hang Seng Index is likely to have 5-10% more downside.”

Shares of Cathay Pacific Airways Ltd, Hong Kong’s main airline, tumbled to a 10-year low Monday as China barred its employees who supported the protests from flying to the mainland.

Swire Properties Ltd – which operates malls and hotels in the city – fell 5.4%, taking its losses since June 10 to 24%.

Mainland investors have made the most of the slump in Hong Kong-listed equities, purchasing stocks through exchange links every day this month.

They bought a net US$289 million worth of the city’s shares on Monday, even as onshore markets rallied. The Hong Kong dollar weakened as much as 0.02% on Tuesday.