Since activists started taking to the streets of Hong Kong in late September, the movement to paralyze Hong Kong’s financial district in protest at the Chinese ruling on who can stand in the elections to govern Hong Kong in 2017, has attracted international attention. It’s also gained the support of tens of thousands of Hong Kong residents who have joined the student-led Occupy Central movement. But what impact has this pro-democracy civil disobedience movement had on the finance markets?
Volatility for the Hong Kong Dollar (HKD)
HantecFX notes that volatility in the Hong Kong dollar has increased significantly since the protests began, with the average daily traded range for the HKD more than tripling since September 26th.
For 2014, in the year to 25th September, the average daily traded range was 18 pips. Since 26thSeptember, the average daily traded range has increased dramatically to 57 pips, showing a clear knock-on effect from the Occupy Central protest movement.
However, despite the turbulence in the trading range, the impact on the economy is not expected to be too significant in the longer term.
In fact, the consensus of economists forecasting Hong Kong GDP is that there will be no impact on growth at all this year.
In a Bloomberg survey, 13 out of 15 economists have reaffirmed their existing optimistic growth forecasts and, due to this, Hong Kong is still expected to grow by 2.5% in 2014 and 3.1% in 2015.
The impact on Q3 GDP has been compared to the effect of a typhoon. To put it into perspective, Hong Kong is hit an average of three of these extreme weather events a year, so the feeling seems to be that the Occupy Central effect is a storm that the economy can weather.
Impact on Chinese National Holiday Break (or Golden Week)
According to the Hong Kong Retail Management Association the impact on major Hong Kong retail chains was as much as 50% down during typically busy Golden Week, as shoppers were deterred from going out and many shops were forced to stay closed as the student-led protesters occupied their doorways. This is despite the China Tourism Academy predicting a 13 per cent increase in Golden Week travel, with mainland tours to Hong Kong being largely unaffected.
However although Golden Week is a key trading time in Hong Kong’s retail calendar, Christmas and Chinese New Year both traditionally generate stronger sales than the Golden Week holiday period. Also, it’s thought that the launch of the iPhone 6 gave the retail sector a boost, despite the protests, showing the strength of Hong Kong’s consumer appetite for emerging technology.
With Hong Kong’s Beijing-appointed Chief Executive Leung Chun-ying refusing the increasingly angry calls for his resignation and admitting the Occupy Central movement could “last for quite a long period of time,” it remains to be seen what the effect will be on Christmas sales, but with the growth forecasts remaining intact, at the moment it seems that, despite the disruption on the streets, the effect on the economy has been a blip rather than a major cause for concern.
However with the protesters showing no signs of backing down in their fight for fairer elections, and the administration in Beijing showing no intention of giving in to Occupy Central’s demands, interested parties will continue to keep a close eye on the situation in Hong Kong.
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