What is happening now in Hong Kong and how is it affecting the markets? - Seedly
 

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Asked by Anonymous

Asked on 14 Jun 2019

What is happening now in Hong Kong and how is it affecting the markets?

Past few days, there has been news of protests going on in HK. What was the main trigger and what are the effects of such a thing happening?

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Lok Yang Teng
Lok Yang Teng
Level 8. Wizard
Answered on 15 Jun 2019

Everything started off with a controversial proposed extradiction bill. To explain we have to go all the way back to the 1990s.

After British rule, Hong Kong was handed back to China under the 'one country, two systems' model. Hong Kong has since become the home to foreign companies that want easy access to China and other growth markets in Asia. The bill would allow extraditions from Hong Kong to greater China - including the mainland, Taiwan and Macau - for the first time, closing what Hong Kong government officials have repeatedly described as a “loophole” that they claim has allowed the city to become a haven for criminals from the mainland. There has been concerns over the fairness of the mainland's rule and many fear of being extradited over political reasons or business offences.

Short term effects:

  • Businesses close, affecting profits
  • People choosing to stay indoors, affecting spending
  • Destruction to properties, costly to government and individuals

Long term effect:

  • Investors may look for other alternative away from HK as it 'becomes more China' to other financial hubs such as Singapore

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I agree with Lok. What happen is with China's influences growing day by day and with it's ties with U.S now; countries and businesses are both wanting to have good relationship with and also afraid of China. They are dependent on PRC for consumerism and low cost materials but the Chinese government hasn't been the easiest to communicate with because they have the negotiating powers and their own beliefs.

Taiwan has been struggling with their ties with China; so has HK. Even though HK has returned to China many years back till now today the citizens of HK refused to acknowledge that because of the political freedom that they have enjoyed; and which they believe would likely be removed if they become more "China oriented".

Having the new extradition laws would cover the loopholes for criminals; but to the HK citizens it would make it easier for Chinese government to interfere in HK jurisdiction. Of course there are other concerns which are not suitable for discussions here; given the bad records of some Chinese officials in the past who has since been dealt with by the law.

It is likely the protest situation will continue to last for probably a few months and in the short term; I would expect businesses with obvious ties to China (e.g. HW) will take the brunt but in the long term I do not think it will be as serious as the case of yellow vest in Paris.. as from the looks of it it seems like the HK government is going to push ahead with it whatsoever and wants it done asap.

Investors may also held off trading for the moment but that should be about it IMHO.

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