CFDs are complex financial instruments and come with a high risk of losing money rapidly due to leverage. You should consider whether you understand how CFDs work, and whether you can afford to take the high risk of losing your money. CFDs are complex financial instruments and come with a high risk of losing money rapidly due to leverage. You should consider whether you understand how CFDs work, and whether you can afford to take the high risk of losing your money.

Hong Kong faces recession amid civil unrest, social crisis

The third quarter – July to September - is likely to contract from the previous quarter, which would mark a technical recession which is defined by two straight quarters of economic contraction.

The three months of anti-government protests that shook Hong Kong has disrupted businesses and air travel causing Chinese tourists to shun the special administrative region. To add to that, the country is expected to face its first recession in a decade, as banks issue profit warnings, and hotels and restaurants experience dwindling sales.

The escalating tariff war between China and the United States (US) has also burdened this global trade and business hub.

In the second quarter, Hong Kong’s economy shrank 0.4% from the previous quarter. At that point, the anti-government protests were mild compared to the demonstrations in the months that followed.

The third quarter – July to September - is likely to contract from the previous quarter, which would mark a technical recession which is defined by two straight quarters of economic contraction.

The Hong Kong leaders are expecting an economic growth of 0% to 1% for the full-year, but experts are predicting for a contraction, due to the social crisis unfolding.

Due to the political unrest, banks have issued profit warnings while Hong Kong’s billionaires such as Li Ka Shing has urged for a halt to the unrest ‘in the name of love’.

China’s largest e-commerce firm Alibaba Group is delaying its close to US$15 billion listing in Hong Kong, people familiar with the matter told Reuters.

On Wednesday, Bank of East Asia warned on further impact the protests could have on small businesses, after it posted a 75% fall in net profit in its first half due to write-downs in China.

Across the border, the gloves may have come off in the latest US-China trade war dispute. The escalating trade war is not helping Hong Kong in getting any boost externally.

On Friday, China’s Finance Ministry announced new tariffs of between 5% and 10% on US$75 billion worth of goods from the US, in a retaliation to the earlier 10% of tariffs on US$300 billion worth of Chinese goods.

The Finance Ministry also reinstated 25% of tariffs on US automobiles and auto parts. The tariffs were initially suspended after the leaders of both countries met in Argentina last year.

US president Donald Trump has ordered US firms to ‘immediately start looking for an alternative to China’. The president’s top aides subsequently downplayed the “order”. ‘I think what he was saying is that he is ordering companies to start looking,’ said US treasury secretary Steven Mnuchin.


This information has been prepared by IG, a trading name of IG Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.
CFDs are a leveraged products. CFD trading may not be suitable for everyone and can result in losses that exceed your initial deposit, so please ensure that you fully understand the risks involved.

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