Global stocks moved lower on Monday, Sept. 29, as markets responded to protests in Hong Kong.
Hong Kong protests and investor sentiment
Some experts asserted that these protests, spurred by the Asian nation’s plan to limit the number of candidates Hong Kong voters can choose from, hampered investor risk tolerance, USA Today reported. Rod Smyth, chief investment strategist at Riverfront Investment Group, provided such a view.
“Markets are jittery because anything that threatens Hong Kong’s status as a one country, two systems place could impact the world economy, with the biggest impact on companies based or listed on the Hong Kong stock exchange,” Smyth told the news source.
The situation creates uncertainty, and that ambiguity is impacting stocks, Quincy Krosby, a market strategist at Prudential Financial, told the media outlet. He noted that if the protests continue, there are questions about how the Chinese government will respond, and how these actions reflect on the nation’s authorities. Krosby emphasized that the pro-democracy protests could spread to the Chinese mainland, and in particular, Beijing.
Even if this turmoil stays confined, it could still have major implications for the entire nation, Patrick Chovanec, chief strategist at Silvercrest Asset Management, told The Wall Street Journal.
“Hong Kong is China’s most visible international city and its most global city in terms of capital flows and in terms of using it as a business base, so anything that happens in Hong Kong – even if it’s limited to Hong Kong – still casts a very long shadow on China and the region,” he told the news source.
Chinese Stocks Move Lower
Amid this conflict, global shares declined, and the Hang Seng Index was 1.1 percent lower by 10:57 a.m. in Tokyo, according to Bloomberg. The MSCI Asia Pacific Index was also down, having declined 0.9 percent.
The S&P 500 Index dipped slightly, depreciating 0.3 percent to 1,977.80, USA Today reported. The Nasdaq composite also moved lower, dropping 0.1 percent to 4505.85. The turmoil in Hong Kong is only one event that has undermined investor risk tolerance.
Impact of Geopolitical Events
Geopolitical turmoil in Syria, Iraq and Ukraine has put downward pressure on equities, according to the news source. In addition, stocks hit new record levels earlier this month, and many investors used the opportunity to take profits. Mark Lister, head of private wealth research at Craigs Investment Partners Ltd., commented on the situation when speaking with Bloomberg.
“Markets are reasonably jittery at the moment because, despite having pulled back a little, they’re still quite elevated,” he told the news source. “In 30 days you’ve got QE done and dusted and so we’re at a bit of a turning point for the market and people are a little nervy. Things that come out of left field like the Hong Kong protests or conflict in Ukraine put people on the back foot.”
Lister is certainly not the only one who has mentioned the potential headwinds that increasing Fed interest rates could create for the stock market. Market participants around the world have been scrutinizing the statements of the central bank in an effort to pinpoint exactly when the financial institution will push its borrowing costs higher.
The Fed has been tapering quantitative easing, and these monthly bond purchases will be ending in October. The central bank had been buying $85 billion worth of debt-based securities per month between late 2012 and the end of last year. The financial institution made its first cut in January, lowering the pace to $75 billion a month.
Investors Prepare for Volatility
Amid the speculation surrounding the Fed easing monetary stimulus and the various geopolitical challenges happening in places like Hong Kong, many investors are getting ready for more volatility in the coming months, according to The Wall Street Journal.
These global market participants will have several pieces of information to watch for, as the Labor Department will soon release its September jobs report, the European Central Bank has a meeting and companies will begin reporting third-quarter earnings soon, the media outlet reported.
Investors recently received news that U.S. gross domestic product expanded at an annualized rate of 4.6 percent in the second quarter, greater than the 4.2 percent that was previously thought. The latest figures are from the third and final revision provided by the Commerce Department.
This robust data coincided with reports showing that in August, personal income rose at an annualized rate of 0.3 percent and consumer spending gained 0.5 percent, according to The Wall Street Journal.
Investors who trade stocks online might want to keep track of the coming economic reports, as these could play a key role in the price movements global equities experience in the coming months. In addition, playing close attention to the developments in Hong Kong might keep these market participants well-informed.