HSI Continues Fall, Hong Kong Dollar Edges Up

The Hang Seng Index fell on Friday, capping a tumultuous week that saw a sharp sell-off fuelled by violent protests in the city, while a tightening of liquidity in the city's financial system pushed the Hong Kong dollar up.

The Hang Seng Index fell 0.7 percent, to 27,118.

The benchmark Shanghai Composite Index shed 1 percent, to 2,881 while the Shenzhen Composite Index lost 1.8 percent, to 1,505.

Most other Asian markets fell on geopolitical concerns, while oil prices were mixed after the previous day's surge fuelled by attacks on two tankers in the crucial Gulf of Oman.

Singapore shed 0.2 percent and Seoul lost 0.4 percent while Taipei was off 0.3 percent. Mumbai, Bangkok, Manila and Jakarta also fell, though Tokyo ended 0.4 percent higher and Sydney gained 0.2 percent.

Adding to the downbeat mood are concerns about tensions in the Middle East after US Secretary of State Mike Pompeo accused Iran of responsibility for the Gulf tankers attack.

The news sent the price of crude surging more than 4 percent at one point on Thursday. PetroChina, CNOOC and Sinopec gained in Hong Kong but the rises were limited, hit by caution after this week's extradition bill protests.

Analysts also are also watching a tightening of liquidity in the city's financial system that has seen the amount banks charge each other for borrowing cash hit a more than 10-year high. This has pushed the Hong Kong dollar to highs not seen since the end of last year.

Experts said this has been caused by a number of factors including seasonal withdrawals such as for dividend payments and dealers preparing for new listings – particularly of tech giant Alibaba.

But they suggested concerns about the protests and the possible implementation of the extradition law could also be playing a role, leading investors to take cash out of the city.

"Make no mistake, this is a massive deal for Hong Kong as if the bill is passed it will most certainly erode the rule of law and autonomy which has been the pillar of Hong Kong's financial prosperity," said Stephen Innes, managing partner at Vanguard Markets. (AFP)