Thu Aug 15, 2019, 09:26 AM

How Hong Kong clashes could wallop the U.S stock market

Protests in Hong Kong that have persisted for the past two months could eventually deliver a more lasting blow to U.S. and global markets, market strategists and geopolitical experts told MarketWatch.

The Hong Kong Hang Seng (HK:HSI) slipped 0.4% on Monday and is down 7% so far in August and nearly 10% over the past three months, according to FactSet data. The exchange traded iShares MSCI Hong Kong ETF (EWH) one of the most popular funds used to gain exposure to Hong Kong stocks, was down 3.2% in Monday and has fallen 9.5% so far in August and 12.4% over the past 90 days.

“In addition, the Chinese media have already accused the U.S. of being behind the protests — or at least encouraging them — tying the unrest in Hong Kong to the greater trade dispute with the U.S.,” Zaccarelli said.

“The big fear is that Beijing could respond with force of the kind seared into memories about Tiananmen Square. If so, assessments of the Politburo would also have to be revised to stand at a more pessimistic view. In turn, markets would have to become less hopeful of the degree and speed of progress possible on a whole host of fronts, including trade,” Ken Odeluga, market analyst at City Index told MarketWatch.

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