Tough Week Leaves Hong Kong Stocks Set to Be World’s Worst Performers

(Bloomberg) -- Hong Kong stocks have ended the week as the world’s worst performers.

The Hang Seng Index fell for a fifth day to end the week down 3.4%. It dipped back below its 50-day moving average earlier this week, just days after rising above it.

Local unrest and the trade war have conspired to drag shares lower, while the Federal Reserve’s rate cut this week was seen unlikely to feed into the cost of credit for businesses and households in a city whose dollar peg means that it imports U.S. monetary policy.

Months of protests have unnerved investors and consumers and raised the prospect of capital flight. A range of indicators weakened sharply in July and August, signaling that the city could tip into recession. Fitch Ratings Inc. this month downgraded Hong Kong as an issuer of long-term foreign currency debt for the first time since 1995.

“The protests are the biggest drag on sentiment and unless that issue is resolved the market will remain weak,” said Alvin Cheung, associate director of Prudential Brokerage Ltd. “The government expects a big hit to the city’s economy in the second half, and that could filter through to corporate earnings and weigh on the Hang Seng Index.“

MTR Corp. ended the week down 3% after one of its trains derailed in Hong Kong, dealing a fresh blow for the developer and subway operator that has become a target and battleground in the anti-Beijing demonstrations rocking the city. A stock gauge of property developers fell 3.2% with Hang Lung Properties Ltd. and CK Asset Holdings Ltd. tumbling at least 4.7% among the biggest laggards. Mainland investors net sold Hong Kong shares through stock connect this week for the first time in 19 weeks.

--With assistance from Molly Dai.

To contact Bloomberg News staff for this story: Amanda Wang in Shanghai at twang234@bloomberg.net

To contact the editors responsible for this story: Sofia Horta e Costa at shortaecosta@bloomberg.net, David Watkins, Kevin Kingsbury

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With assistance from Bloomberg