Hong Kong investors brace for possible wild ride as wave of global trading gets ready to resume

Hong Kong traders are bracing themselves for what could be a wild session when trading resumes Thursday, following days of drama building out of the US that sparked a bloodbath on Wall Street and in Tokyo.

The Hong Kong market has been closed since Monday noon for the Christmas holiday, when it ended slightly down. When US markets opened on Monday US time, the S&P 500 Index plunged 2.7 per cent to close on the brink of entering a bear market – the market’s worst Christmas Eve trading day in history.

US traders fled as President Donald Trump ratcheted up his criticism of US Federal Reserve Chairman Jerome Powell for raising interest rates too fast and tweeted that the Fed is “the only problem” in the US economy. Meanwhile, media reports suggested that a furious Trump had discussed firing Powell, his nominee for the position.

Donald Trump attacks the Fed as ‘the only problem’, and US markets plummet again

In addition, US Treasury Secretary Steven Mnuchin’s attempt to raise confidence in tumultuous markets by calling the heads of the six largest US banks over the weekend spooked investors. A partial shutdown of the US government triggered by a stand-off between Trump and Congress over funding for a border wall added more gloom to the markets.

The combination led to a sell-off across global markets, with pauses in some markets on Monday midday and Tuesday due to the Christmas holiday.

Japan’s benchmark Nikkei 225 Index plummeted by 5 per cent into bear market territory on Tuesday. On Wednesday, however, it overcame a slump to close up by 0.9 per cent.

As markets in London and the US prepared to reopen, futures trading was mixed. The UK’s FTSE 100 was down 1 per cent as of 5pm Hong Kong time on Wednesday, while the S&P 500, Nasdaq and Dow futures were all up a bit. The Nasdaq Composite Index was the first of the three major US indexes to dive into bear market last Friday.

The Hang Seng closed at 25,651 on Monday, down by 0.4 per cent, and several analysts said they expect it could move toward testing the 25,000 level when it reopens Thursday.

“With US stocks tumbling on Christmas Eve and Japanese stocks also down in sympathy with US, the local market will test lower ground tomorrow with [the Hang Seng Index] revisiting the 25,000 level in the near term,” said Louis Tse Ming-kwong, director of Hong Kong brokerage VC Wealth. Management. “Given that most of the funds are less active before the New Year, the market turnover will be thin. Hence the market direction can be manipulated by a small buy or sell order, which is not representative.”

China stocks fall on Christmas after Japan’s Nikkei enters bear market, another day of losses in US

Mainland China’s markets have been open all week.

Mainland traders were headed for steep losses on Tuesday before bulk buying of large-chip insurers and banks suggested that state funds had intervened to shore up the market. The Shanghai Composite Index plunged by as much as 2.5 per cent before paring some of the losses to close 0.9 per cent lower on Tuesday. On Wednesday, the Shanghai benchmark closed down 0.26 per cent.

The year has been painful for traders of mainland and Hong Kong shares. With only a few days left of trading, the Hang Seng Index is down about 14 per cent for this year, while the Shanghai Composite Index is down by about 24.5 per cent.

Additional reporting by Laura He.