Hong Kong’s stock market had its worst day since 2008 this week, with the Hang Seng China Enterprises Index (HSCEI), an index of mainland China companies listed in Hong Kong, closing down 7% Monday and dropping another 4% by mid-day Tuesday.
- Overall, the HSCEI is down 16% in the last five days while the overall Hang Seng is down 11%.
- Bloomberg reported that the Hang Seng Volatility Index, which is used to measure volatility in the Hong Kong stock market, has topped 40. This is the first time the index has gone over 40 since March 2020, when the COVID-19 pandemic began and global markets imploded.
- The price of bitcoin (BTC) seems to be fairly unaffected by the market volatility and is nearly flat over the last week. At the time of writing, bitcoin was trading at $38,804, up 0.5% in the last 24 hours, according to CoinGecko.
- Flora Li, Huobi Research Institute director, told CoinDesk this market volatility was largely driven by regulatory developments in China and the U.S., and is unrelated to broader macroeconomic factors which is why it has not impacted the crypto market.
- “Last Friday the [U.S. Securities and Exchange Commission] disclosed a list of delisting risks that included five U.S.-listed Chinese companies, sparking investor concerns about the delisting of Chinese stocks, so Chinese and U.S. investors have been selling off,” she told CoinDesk via email. Investors in Hong Kong have also been selling because of connections between the territory’s market and that in China, she added.
- Even though Hong Kong’s market decline is regulatory and not macro-driven, some investors are looking down the near-term time horizon and urging caution. Andrew Bakst, chief investment officer of Bizantine Capital, told CoinDesk he sees a fragile global economy that needs to break first before it can come back stronger.
- “All-time high intra-country wealth gaps, along with all-time high sovereign debt levels, and all-time highs of inter-country connectivity have created an extremely fragile global economy,” he said. “All three factors are inflationary and hurt sovereign equities.”
- Despite the lack of correlation between Hong Kong’s market volatility and crypto, if there’s a contagion that brings down the global market, Bakst is bullish that Ethereum might be the tie that binds the world as it rebuilds.
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