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Wednesday, November 9, 2016, 16:33

SAR joins global market meltdown

By Duan Ting

SAR joins global market meltdown
Hong Kong’s equity market was not spared from the worldwide sell-off on Wednesday as it became clear that Republican Donald Trump was heading for a stunning upset win in the US presidential election. Experts warn that the election outcome will exert a negative influence on financial markets in the medium-and-long term. (Roy Liu / China Daily)

World and regional financial markets, including Hong Kong’s, took a hammering on Wednesday as Republican candidate Donald Trump pulled off one of the most stunning upsets in US election history by trouncing market favorite Hillary Clinton to win the White House.

The Hang Seng index fell 2.2% to 22,415.19, while the Hong Kong China Enterprises Index lost 2.9% to 9,378.66 points

The shock win by the brash billionaire and former reality TV star, who had not minced his words over protecting US trade and industry and threatening to tear up major international trade pacts throughout his election campaign, rattled investors worldwide , sending stocks into a freefall as markets pondered over the extent of the impact on global economies.

Hong Kong suffered the steepest market fall in almost two months as the Hang Seng Index plummeted 494 points, or 2.2 percent, to end at 22,415 points — the biggest single-day fall since Sept 12 — after having nosedived more than 950 points in morning trading as news emerged that Trump was fast closing in on his sole Democrat rival. The Hang Seng China Enterprises Index sank more than 280 points, or 2.9 percent, to 9,378.

Other key Asian markets were also battered, with the benchmark Shanghai Composite Index slipping 0.6 percent to 3,128, the Shenzhen Composite Index slumping 0.6 percent to 2,068, Japan’s Nikkei Stock Average tumbling 5.36 percent and the South Korea KOSPI Index shedding 2.3 percent.

Market experts were unanimous in their conviction that Trump’s victory will lead to a period of uncertainty in world equity markets as investors rush to siphon their money into safe-haven assets like gold and bonds.

Fielding Chen, an economist at Bloomberg LP, said the election outcome will create market panic and have a negative influence in the medium-and-long term, pointing to Trump’s lack of experience in public office.

He compared the market’s response to that which followed Britain’s shock decision to quit the European Union in June this year, with initial panic before investors start adjusting their strategies to embrace the changes, and the market stabilizing at a later stage.

Chen believed the factors that led to Trump’s victory were the policies he had proposed to focus more on the US economy and the welfare of Americans, while his experience as a businessman would help him re-establish relations with other US partners.

Most pundits interviewed by China Daily expressed concern that the immediate impact of the election outcome will be on the US Federal Reserve’s (Fed) policies, predicting that the pace of further rate hikes will be hastened.

John Woods, chief investment officer at Credit Suisse Asia Pacific, said he expects the US Fed to lift interest rates by 25 basis points next month, to be followed, possibly, by two further increases next year.

In his view, the Hong Kong stock market is likely to see rapid fluctuations in the near term, but the recovery will be quite swift.

As for the Chinese mainland stock markets, Woods reckons that a Trump presidency would have limited impact, saying he remains positive on China with growing signs that the country’s economy is stabilizing.

The offshore yuan exchange rate stayed little changed against the US dollar after plunging to a record six-year low of 6.8 in early trading on Wednesday, as the US dollar softened, which, Woods says, is good news for Asian equities. But he thinks the broad direction of the ongoing weakness of the onshore and offshore renminbi will remain unchanged and the yuan’s exchange rate against the greenback is expected to reach 7.1 in the next 12 months.

tingduan@chinadailyhk.com

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