Hong Kong Stocks Dive As Protests Rumble, China Anger Builds

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HONG KONG: Hong Kong stocks tumbled on Tuesday (Aug 13) as protests that have jolted the city for more than two months fuel political and economic uncertainty, with China's growing frustration leading to worries it will take a tougher line with the standoff.

The increasingly violent unrest in the key financial hub comes as world markets are hit by fears about the global economy and dimming hopes for trade talks between China and the United States.

READ: Hong Kong police admit 'disguising' themselves in protests

READ: Hong Kong police unveil water cannon trucks after new protests

In the latest development, Hong Kong's busy international airport was forced to cancel hundreds of flights in and out on Monday as thousands of demonstrators descended, stranding thousands of passengers.

READ: Hong Kong airport cancels all flights on Monday due to protests

Hundreds of flights were still listed as cancelled at the airport, one of the world's busiest, and protesters called for a new gathering there later in the day.

The abrupt closure came 10 weeks into a crisis that has seen millions of people take to Hong Kong's streets in the biggest challenge to Chinese rule of the semi-autonomous city since its 1997 handover from Britain.

Hong Kong's Beijing-backed leader Carrie Lam has ruled out making concessions and on Tuesday she warned that violence would push the city down a "path of no return".

READ: Violence will push Hong Kong down 'path of no return': Carrie Lam

That came a day after China described violent protests as "terrorism", which analysts said raised concerns among investors.

Stephen Innes, managing partner at VM Markets, said: "Dropping the 'T' word is particularly disturbing as it does suggest a more aggressive mainland response, which triggered a wave of risk aversion across global markets."

The Hang Seng Index was down 1.86 per cent, or 479.07 points, at 25,345.65 by the break.

"SITUATION WILL GET WORSE"

Losses were across the board, with carrier Cathay Pacific shedding more than 4 per cent as it was hit by the cancellation of several flights.

It had already lost almost 5 per cent on Monday after Beijing banned airline staff supporting Hong Kong protesters from flights going through the mainland. Cathay parent Swire Pacific was down 1.17 per cent on Tuesday, a day after losing more than 6 per cent.

MTR Corp, which runs the city's subway network that has seen a number of high-profile violent clashes between protesters and police, was down 3.14 per cent.

Among other firms casino operators were hurt by worries about visitor numbers with Galaxy Entertainment and Sands China both more than 3 per cent off.

There were also big losses for property giants. Sino Land shed almost 2 per cent, Henderson Land fell 1.6 per cent and New World Development was off more than 1 per cent.

Market heavyweight and tech giant Tencent retreated 1.29 per cent while insurer AIA slipped 2.78 per cent.

The long-running demonstrations have had an impact on the city's economy, with the crucial shopping sector being hammered - data showed retail sales sank a much more than expected 6.7 per cent on-year in June.

And the economy expanded just 0.6 per cent in the second quarter, well short of forecasts.

And there were warnings for more trouble ahead for the Hang Seng.

"It looks like the situation will get worse," Airy Lau, investment director at Fair Capital Management. "Together with the higher global recession risk from US-China friction, the Hang Seng Index is likely to have 5-10 per cent more downside."