Hong Kong stock exchange moves to embrace volatility curbs to protect against ‘fat finger’ mistakes, big share price swings
- Hang Seng Index dropped 33.33 per cent on a single day on ‘Black Monday’, October 19, 1987
- Hong Kong exchange now looking at greatly expanding number of stocks under volatility curbs
History has shown some swings of stocks or whole markets can create panic and heavy losses, suggesting why the operator of Hong Kong’s stock market is looking at wider use of volatility curbs.
On October 19, 1987, Hong Kong’s benchmark Hang Seng Index dropped 33.33 per cent on a single day. It became known as “Black Monday.” It not only was the Hang Seng’s biggest fall ever, but the turmoil spread globally, with the US Dow Jones Industrial Average plummeting 22.6 per cent.
Blue chips also haven’t escaped big price swings.
Take HSBC, for example, the largest lender in Hong Kong and Europe and the largest of the three-note-issuing banks in the city. Its stock in one of the most widely held on the benchmark, and people like to buy it as a gift for newlyweds and newborn babies.
But on March 9, 2009, it fell 10.8 per cent during the 10-minute closing auction period. Adding in the loss of the shares during the normal trading hours that day, HSBC lost a total of 24.14 per cent and shed HK$127 billion in market value. It was its worst decline in 20 years.