HK Stocks Battered, Dollar Under Pressure

Real estate companies and financials were among the biggest victims in a stock market sell-off in Hong Kong on Friday after Beijing submitted a security law proposal for the city that has fanned fears of fresh protests.

With the economy already on the ropes because of the coronavirus, investors fled for the hills with many worried about Beijing's increasing influence in the semi-autonomous finance hub and what that could mean for doing business there. 

Plans for the proposal had also sparked warnings of "the end of Hong Kong" and fears of further unrest, while the US State Department said the move was "highly destabilising".

President Trump promised a response, saying: "I don't know what it is, because nobody knows yet. If it happens, we'll address that issue very strongly."

"The very real threat now is the return of mass protests to the streets of Hong Kong, a downgrade in trade status with the US and potentially an exit of large companies from the SAR," said Oanda's Jeffrey Halley.

"Overhanging this, are concerns that China and the United States are about to engage in a new round of trade wars."

The Hang Seng Index ended the day down more than 5 percent, at 23,075.

Property firms – already under pressure from the coronavirus outbreaks – were battered in early trade. 

Sino Land collapsed more than 10 percent, Sun Hung Kai Properties lost 7.8 percent and New World Development dropped 9.8 percent, while Wharf Real Estate Investment shed 9.4 percent.

Swire Pacific and CK Asset Holdings were each more than 8 percent off.

And the picture was no less gloomy for financials, whose profits in the city could be threatened by companies leaving.

Market heavyweight HSBC lost 6.9 percent and BOC Hong Kong shed 7.8 percent, while insurance giant AIA was down more than 9 percent and China Life dropped 6.8 percent.

Subway operator MTR Corp, which was battered during the protests as its stations were targeted by demonstrators, dived nearly 10 percent.

The Hong Kong dollar, which has been at the strong end of its trading band with the US dollar for several weeks, also dropped as dealers began selling the unit.

"Traders around the world are playing the waiting game to see details of the new Hong Kong law to gauge how severe the terms are," said Stephen Innes of AxiCorp.

"And more specifically, the White House response to decide whether Hong Kong's special economic status will be affected." (AFP)