|Day's range||26,309.34 - 26,520.08|
|52-week range||24,896.87 - 30,280.12|
Stocks in major Asian markets saw gains on the first trading day of December as Chinese factory activity presented a positive surprise in November.
The Wall Street Journal reported Thursday that Washington and Beijing are still in disagreement over the size of China’s agricultural purchases. Meanwhile, China has given little indication on how negotiations with the U.S. are progressing.
TOKYO/HONG KONG, Dec 5 (Reuters) - Stock markets in Asia gained on Thursday on hopes that China and the United States may soon seal a preliminary deal to end their 17-month trade war, but conflicting signals from U.S. President Donald Trump kept a lid on investor optimism. Hopes that an agreement would soon emerge stemmed from a Bloomberg report on Wednesday that the two sides were close to a "phase one" deal, and U.S. President Donald Trump's remarks that the talks were going "very well" after he had earlier said it might take until late 2020 to reach and accord.
(Bloomberg) -- Alibaba Group Holding Ltd.’s landmark $11 billion share sale and listing in Hong Kong on Nov. 26 was galvanized by expectations the Chinese e-commerce giant will attract a vast pool of capital from its home country. But some investors caution against unrealistic expectations, especially by mainland investors, and highlight certain restrictions that still govern -- and potentially curtail -- trading activity in Alibaba’s Hong Kong shares.The company’s sheer size and the unprecedented nature of its secondary listing (the primary listing is still in New York) and unique management structure present challenges for investors hoping to gauge everything from Alibaba’s inclusion in indexes -- crucial because they direct the flow of capital from tracker funds -- to its listing status.Here’s what we know.1\. Will Alibaba get added to the Hang Seng Index?Not right now. Alibaba will be added to Hang Seng Composite Index on Dec. 9, but it isn’t qualified to join the benchmark Hang Seng Index or the Hang Seng China Enterprise Index because they comprise only primary listings and corporations without so-called weighted voting rights (WVR).Membership of the 50-member Hang Seng is coveted by corporations because it could trigger billions of dollars of inflows from funds tracking the 50-year-old gauge. Hang Seng Indexes Co. plans a consultation in the first quarter to discuss issues including whether firms with weighted voting rights, like Alibaba, should be eligible for the HSI. Any conclusions should be published by May, Daniel Wong, its head of research and analytics, said in a statement. Even if the index compiler decides to overhaul its rules, the required process means it may not be until late 2020 before Alibaba could join the major Hang Seng benchmarks.Representatives for HKEx and Alibaba declined to comment.Read more: Why Now, and Why Hong Kong, for Alibaba’s Share Sale?: QuickTake2\. Will Alibaba be included in the stock connect program?Maybe, but a lot hinges on policy makers. China doesn’t spell out criteria or qualifications for joining the program, which allows mainland investors to buy stocks listed in Hong Kong. Unlike the HSI, the program isn’t limited to primary listings. It does require review by the China Securities Regulatory Commission, the stock market watchdog.The first companies in stock connect with weighted voting rights were Meituan Dianping and Xiaomi Corp., which mainland investors got access to in late October through the program. That’s after similarly structured Chinese firms started listing in July on Shanghai’s new tech-focused Star board. Many investors expect Beijing to ultimately allow Alibaba’s Hong Kong shares to trade through the stock link with the city as well.But it may not necessarily be in China’s best interest to do so. That’s because other U.S.-listed Chinese firms -- among the country’s largest corporations, from JD.com Inc. to Baidu Inc. -- may be encouraged to follow in Alibaba’s footsteps and conduct their own secondary listings in Hong Kong, bypassing the Shanghai or Shenzhen bourses. That may run counter to Beijing’s longstanding ambitions of developing healthy, vibrant mainland exchanges, particularly as unrest grips Hong Kong.3\. Can Alibaba change its primary listing to Hong Kong?It’s possible -- thereby attracting investors with a preference for main listings, and at the same time scoring brownie points with some in Beijing who could view that as supporting China’s policy ambitions. Alibaba was given the green light to list in Hong Kong based on a new “Secondary Listing” rule, or Chapter 19C. It allows companies to conduct follow-on share offerings without complying with more stringent rules laid down by Hong Kong Exchanges & Clearing Ltd. governing first-time listees.Alibaba may enjoy special status in having more freedom to comply with Hong Kong listing requirements. Under rules laid out in a consultation paper in April last year, Chinese firms that went public before Dec. 15, 2017 don’t need to comply with “WVR” safeguards if they later switch their primary listing to Hong Kong. Alibaba, which debuted in New York in 2014, said in its Hong Kong listing prospectus it’s a “WVR” company similar to Meituan and Xiaomi.Meanwhile, Alibaba employs a fairly unique structure in which a group of partners have the right to nominate a majority of the firm’s board -- exerting outsized influence on Alibaba’s direction.In addition, Hong Kong listing rules say if trading volume there exceeds 55% of global turnover over an entire fiscal year, the stock has to adopt primary listing status in Hong Kong. HKEx gives such Chinese companies a year to comply. But with Hong Kong’s stock registration office listing just 23% of outstanding Alibaba shares as of Nov. 28, a majority of trading volume occurring there may be a tall order.\--With assistance from Paul Geitner and Fox Hu.To contact the reporter on this story: Lulu Yilun Chen in Hong Kong at email@example.comTo contact the editors responsible for this story: Peter Elstrom at firstname.lastname@example.org, Edwin Chan, Kevin KingsburyFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
The Australian share market suffered its worst day since mid-August on renewed fears over global trade uncertainty. The sell-off wiped on $50.8 billion in value from the market and was the largest single-day drop since a 187.8 point loss on August 15.
Asian shares fell on Tuesday after U.S. President Donald Trump stunned markets by imposing tariffs on imports from Brazil and Argentina, rekindling fears over global trade tensions, while weak U.S. factory data added to the investor gloom. Pan-region Euro Stoxx 50 futures were up 0.41% in early trades, while German DAX futures added 0.45% and FTSE futures gained 0.26%.
A private survey on Monday showed China’s manufacturing activity expanded more than expected in November. Chinese state media said Sunday that Beijing wants a rollback of tariffs in the phase one trade deal that the two economic powerhouses are aiming to reach.
(Bloomberg Opinion) -- Hong Kong property companies, whose shares have been beaten down amid this year’s protests, are missing an opportunity to unlock value for shareholders. More should consider packaging their trophy assets into real estate investment trusts to release capital and improve the market’s view of their prospects.The Hang Seng Properties Index has slumped more than 17% from an April high as the unrest disrupted business, deterred home buyers and caused tourists and shoppers to stay away. The broader Hang Seng Index has lost 11%. Many real estate companies are trading at a steep discount to the value of their underlying assets.To understand why developers are trading at a discount, look at the ownership structure. Many are controlled by founding families, who are reluctant to part with their most prized properties. Take Hang Lung Properties Ltd., for example. Chairman Ronnie Chan owns more than half the company, which trades at a price-to-book ratio of 0.52 times.As a result of the reluctance to divest, companies end up acting essentially as landlords rather than developers, stunting the potential for growth. In effect, investors are participating in a bond-like structure by collecting rental income instead of achieving an equity-like return via property development and sales. Concern that Hong Kong is at the peak of a property cycle has also helped to depress valuations, with investors discounting developer shares to reflect the risk of a decline. Hang Lung’s price-to-book ratio has dropped from a peak of more than 1.8 times over the past decade as Hong Kong real estate prices surged.Spinning off rental properties into trusts, or REITs, could help to narrow the discount to net asset value. Such a maneuver would enable family-owned entities to retain control while generating capital from REIT offerings that could be redeployed into better-yielding projects. That in turn would raise return on equity, benefiting owners and investors. The parent company would enjoy higher growth prospects through a relatively asset light model while the REIT provides a steady income stream.Income taxes are the primary obstacle to expansion of Hong Kong’s REIT market. At the moment, Hong Kong property trusts are taxed like corporations at 16.5%. Singapore, by contrasts, grants a tax exemption to REITs holding both domestic and foreign properties as long as they pay out 90% of their income in dividends. In 2014, Hong Kong’s Financial Services Development Council urged the city’s authorities to stimulate the REIT market by introducing a tax break, so far to no avail.That discrepancy has helped Singapore to maintain its lead over Hong Kong as a center for REITs. Singapore, which issued its first property trust in 2002, has 43 now with total assets of $112 billion. Hong Kong’s first listing was Link REIT in 2005. Nine more have followed since, bringing total assets to $67 billion. No new REITs have been issued in Hong Kong since 2013; by contrast, Singapore has seen 11 listings in the past five years.Share performance has also been superior in the Southeast Asian city-state. The S&P Singapore REIT index has returned 25% this year, compared with less than 4% for its Hong Kong equivalent. The valuation gap is stark: Singapore REITs trade at about 1.1 times book, versus 0.6 times for Hong Kong.That might suggest that Hong Kong property companies have little to gain by packaging assets into trusts. Besides the tax issue, the discount may reflect that most REIT listings in Hong Kong to date haven’t included companies’ highest-quality properties. In any case, there’s another solution for the city’s developers: List their REITs in Singapore. That might even sway Hong Kong authorities into reconsidering their stance. (Corrects the year of Link REIT’s listing to 2005 in the seventh paragraph.)To contact the author of this story: Ronald W. Chan at email@example.comTo contact the editor responsible for this story: Matthew Brooker at firstname.lastname@example.orgThis column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Ronald W. Chan is the founder and CIO of Chartwell Capital in Hong Kong. He is the author of “The Value Investors” and “Behind the Berkshire Hathaway Curtain.”For more articles like this, please visit us at bloomberg.com/opinion©2019 Bloomberg L.P.
(Bloomberg) -- Friday’s sudden tumble in Hong Kong stocks spread to the onshore market, with selling accelerating amid nervousness over a lack of clear triggers for the slump.The market was rife with speculation: health-care shares tumbled in Hong Kong when a document circulating on social media suggested Beijing could add dozens of new drugs to another round of procurement. Others said there was too much macro risk going into the weekend, with increasing uncertainty on the trade-war front. In onshore trading, the selling accelerated in the afternoon session as investors took profits in crowd favorites like Kweichow Moutai Co.The Hang Seng China Enterprises Index lost 2.5%, while the FTSE China A50 Index of onshore-listed large caps fell 1.3%. Hong Kong’s Hang Seng Index dropped 2% on volume that was 36% higher than the 30-day average. Some traders said Thursday’s U.S. holiday meant investors lacked cues in Friday’s Asian session.“There’s no obvious trigger” for Friday’s weakness, said Linus Yip, a Hong Kong-based strategist with First Shanghai Securities Ltd. He said continued uncertainty over the outcome of U.S.-China trade negotiations could be one factor weighing on sentiment.There’s persistent concern over how China may retaliate against a U.S. bill on Hong Kong signed by Trump this week. Beijing on Thursday reiterated its threat to take action, without elaborating. Chinese authorities have been known to make significant announcements late on Friday. Month-end maneuvering was also seen as a possible factor.Hong Kong stocks rose Monday after pro-democracy candidates swept the board in district council elections, putting pressure on the city’s government to address issues that have fueled months of protests. Days later, Trump signed a bill into law expressing support for Hong Kong’s protesters.Moutai fell 4% Friday, its biggest loss since Sept. 11. CSPC Pharmaceutical Group Ltd. and Tonghua Dongbao Pharmaceutical Co. almost 10%, among the biggest laggards on the MSCI China Index.To contact the reporter on this story: Cindy Wang in Taipei at email@example.comTo contact the editors responsible for this story: Sofia Horta e Costa at firstname.lastname@example.org, Richard FrostFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
Thursday’s selling pressure was mild when compared to previous breaks in the stock market in reaction to potentially negative news about a breakdown in talks between the United States and China. The news creates uncertainty, which usually encourages investors to lighten up on risky positions. However, it’s probably not a deal breaker.
Last week, negative headlines dominated the news, leading to some light profit-taking in the stock market. This week, there haven’t been any negative comments, and the rally to record highs in the U.S. has resumed. However, there are some whispers over the lack of concrete evidence that progress is being made in the trade talks.
(Bloomberg) -- Most mainland investors can still only watch gains in Alibaba Group Holding Ltd., as China’s most valuable listed company extends increases after its Hong Kong stock exchange debut.Fund mangers say the shares will be a must-have once they are included into the city’s trading links with the mainland, timing of which remains uncertain. The industry is unfazed the company’s U.S.-listed equity has nearly tripled in price since September 2014’s initial public offering, predicting that Chinese investors’ familiarity with the e-commerce firm will push Alibaba’s market valuation higher still.“It’s a unique and rare asset -- like Tencent and Meituan -- that can’t be found in mainland-listed stocks,” said Qu Shaohua, managing director at Acroguardian Investment Co. “Though we don’t own Alibaba shares yet, I think it’s important that we do once it becomes available through the stock connect -- at the right price.”The stock is eligible to join the Hang Seng Composite Index, of which many components can be traded through Chinese exchanges’ trading links with Hong Kong’s. But due to Alibaba’s unequal voting rights structure, its shares must trade for some seven months in Hong Kong and meet other requirements in areas like trading volume before being included into the stock connect, according to rules published by the Shanghai and Shenzhen stock exchanges.The mainland bourses didn’t immediately reply to faxes, calls and emails seeking comment on Alibaba’s eligibility for the stock links.Jiang Liangqing, a fund manager at Ruisen Capital Management in Beijing, has Alibaba high on his shopping list and expects other institutional investors to add the stock as an “essential part” of their portfolio, just like they did with Tencent Holdings Ltd. when its shares traded in the city became accessible to mainland investors a few years back.Alibaba finished up 3% on Wednesday at HK$193.2, after gaining 6.6% on its debut. The closing price was around 25 times projected earnings for the next 12 months, versus Tencent’s 26 times and Meituan Dianping’s 117 times.The company is not totally strange to Hong Kong’s stock market. Business-to-business marketplace Alibaba.com Ltd. was floated there in 2007, but Alibaba bought back the shares five years later at the IPO price.The parent company then went public in New York in 2014 after being turned down by Hong Kong. It has created more than $250 billion in wealth for investors since its IPO.Many mainland China traders say they are not fretting about missing out on the gains, instead projecting optimism that domestic investors -- who shop, order takeout and get groceries delivered through Alibaba’s services on a regular basis -- will give its Hong Kong stock a lofty valuation over time.“Mainlanders are going to go crazy over this one, when they can finally buy a piece of Alibaba with yuan,” said He Qi, a fund manager at Huatai Pinebridge Fund Management whose mandate includes Hong Kong shares.One of the latest Chinese technology firms to be eligible for trading by Chinese investors through the link with Hong Kong’s stock exchange, Meituan was the most net-purchased stock by mainland investors in the two weeks following its stock connect inclusion in late October, according to figures compiled by Bloomberg.To be sure, some traders aren’t in a rush to jump on the Alibaba bandwagon, highlighting risks such as China’s still-slowing economic growth.“Alibaba is faced with heightened competition, both on its home turf of e-commerce and in the booming short video realm,” added Wei Hai, chief investment officer at Jungle Gene Associates. The hedge fund holds a position in U.S. stocks.(Updates with stock close seventh paragraph.)\--With assistance from Jeanny Yu, Lujia Yu and Mengchen Lu.To contact Bloomberg News staff for this story: April Ma in Beijing at email@example.com;Ken Wang in Beijing at firstname.lastname@example.orgTo contact the editors responsible for this story: Sofia Horta e Costa at email@example.com, Fran Wang, Kevin KingsburyFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
Alibaba Group’s Hong Kong shares closed their first trading session up 6.6% from the issue price after this year’s largest stock sale. Australia’s Westpac Banking said on Tuesday its CEO will step down and its chairman will bring forward his retirement as a money-laundering scandal rocks the country’s second-largest retail bank.
(Bloomberg) -- Equity traders cheering the prospect of a restoration of stability in Hong Kong keep getting disappointed.Stocks fell 0.3% on Tuesday as the city’s leader Carrie Lam offered no new concessions in her first public comments since Sunday’s vote. It follows Monday’s 1.5% gain in the Hang Seng Index, partly triggered by a landslide election victory for pro-democracy forces. Some analysts were predicting the results would force the government to address issues that have fueled the unrest.It’s getting increasingly difficult to have a view on Hong Kong’s equity market. Despite violent street protests and events such as a university siege, stocks have shown a tendency to revert to the mean for the better part of four months. The Hang Seng Index is more than twice as volatile as when protests began in early June, even though the index is basically flat.“When you have a very wide range of outcomes, it becomes difficult to come up with a specific view or build a reliable trading or investment model,” Isaac Poole, chief investment officer at Oreana Financial Services Ltd., said by phone. “Market sentiment and market momentum become key drivers. It’s not an easy environment.”This month has been particularly tricky for anyone trying to time the market. Hong Kong stocks lost $118 billion in value on Nov. 11, their worst day in more than three months, after police shot and wounded a protester. A week later they rose, despite a dramatic standoff between protesters and police at a local university. A short squeeze then followed, stoking the world’s biggest gains. That ended after only two days.For investors tired of the whiplash, hopes were high that another day of gains for the Hang Seng Index on Tuesday would provide a much needed breather. But even if the weekend’s peaceful vote removed some near-term uncertainty, stock bulls have plenty of reasons to stay on the sidelines. Turnover in Hong Kong was below this year’s average for 14 straight days before Alibaba Group Holding Ltd.’s debut, showing a lack of conviction either way.“Now that the election is out of the way, markets will turn to fundamentals,” said Hao Hong, head of research at Bocom International. “If you look at economic fundamentals, they are deteriorating. Investors will eventually have to focus on that.”(Updates prices throughout.)To contact the reporter on this story: Elena Popina in Hong Kong at firstname.lastname@example.orgTo contact the editors responsible for this story: Richard Frost at email@example.com, Sofia Horta e Costa, David WatkinsFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
Pro-democracy candidates in Hong Kong romped to a symbolic majority in district council elections over the weekend, after residents turned out to vote en masse following six months of anti-government protests.
Hong Kong’s democrats scored a landslide majority in district council elections, which saw a record turnout after six months of anti-government protests, increasing pressure on the Chinese-ruled city’s leader on Monday to listen to calls for democracy, according to CNBC.
(Bloomberg) -- A mirror to Hong Kong’s fortunes since its 1969 launch, the Hang Seng Index has also become a reflection of China’s economic rise.The benchmark stock gauge marks 50 years since its official debut on Sunday. Commencing as the city recovered from Communist riots two years earlier, it has served as a yardstick for Hong Kong’s rise and its rebounds from various crises -- a trait being tested anew as pro-democracy protests convulse the territory.It’s up by around 16,700% since 1969, according to data compiled by Bloomberg (the index was backdated to July 1964 on its release). In that time its constituents have evolved from local firms to an embrace of mainland Chinese names that now account for more than half of its market value.“The Hang Seng Index has become a proxy of China’s economy,” said Jackson Wong, asset management director at Amber Hill Capital. “It’s no longer a pure reflection of Hong Kong.”In August 1992, what’s now known as CITIC Ltd. became the first Chinese company to join the gauge. Today the majority of companies on the index get their revenue from mainland China.The gauge’s correlation with the Shanghai Composite Index has been hovering near a record high, according to data compiled by Bloomberg. Between 2001 and 2019, two Hang Seng heavyweights Tencent Holdings Ltd. and China Mobile Ltd. were the biggest contributors to gains.The index will need to continue adapting, said Arthur Kwong, head of Asia Pacific equities at BNP Paribas Asset Management. A wider embrace of Chinese mid-cap stocks is needed to stave off competition from rivals such as MSCI Inc. and FTSE Russell, he added.“I’m still bullish on China’s large-caps, but this segment is more mature,” said Kwong. “I’m more positive on China mid-caps, the opportunities for growth are there. If the Hang Seng Index can be more flexible, it will do well.”Hang Seng Indexes Co. says it is planning a consultation in the first quarter to review the presence of financial stocks, which currently account for about half the weight on the gauge. That compares with an average of 19% of its peers in Europe, U.S., Japan and mainland China, according to Bloomberg Intelligence.It will also discuss including firms that have shares with different voting rights, held by technology companies like Alibaba Group Holding Ltd. -- one of the reasons Hong Kong lost out to New York in 2014 for the company’s initial public offering.Alibaba’s $11 billion Hong Kong debut could provide a “shake up of the Hang Seng Index,” if it becomes a member, said Bloomberg Intelligence analyst Steven Lam. AIA Group Ltd. and HSBC Holdings Plc would likely to see their weightings reduced in the event, he said.Alibaba Won’t Join Hong Kong’s Stock Benchmark Any Time SoonHong Kong’s gauge has reflected the city’s growing pains, with crashes during the world oil crisis in the 1970s, the early-1980s impasse between China and Britain during handover talks and financial crises in 1997 and 2008. Now, the city’s markets are under pressure from five months of protests that have plunged the local economy in recession and an ever-changing whirl of trade war sentiment.“There are some challenges to Hong Kong that are well documented,” said Tai Hui, Asia chief market strategist at JPMorgan Asset Management. “But Hong Kong has been through many past crises and has historically shown resilience. Long-term investors should bear that in mind.”\--With assistance from Amy Li.To contact the reporter on this story: Jeanny Yu in Hong Kong at firstname.lastname@example.orgTo contact the editors responsible for this story: Sofia Horta e Costa at email@example.com, David WatkinsFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
Last week, a deal was “close”. This week it’s on the “doorstep” of being reached. It seems everything in between was just a bunch of “noise”.
(Bloomberg) -- U.S. equities slid following losses in Europe and Asia as traders weighed conflicting signals about the outlook for a trade deal between Beijing and Washington.The S&P 500 Index fell for a third day, the longest losing streak in almost two months, but remained within 1% of a record high. The dollar held steady and Treasuries dipped as China’s chief trade negotiator reportedly said he was “cautiously optimistic” about reaching a phase-one accord. Pessimists focused on speculation Donald Trump may sign legislation backing Hong Kong protesters, setting up further conflict between the nations. TD Ameritrade soared on reports that Charles Schwab Corp. is in talks to buy the brokerage.Hong Kong’s deteriorating situation may prove crucial to the trade talks, and on Thursday a commentary from China’s state-run news agency accused the U.S. of applying a double standard. China has threatened to retaliate for the passage of the American bill and said supporting the protesters was a “gross” interference in Hong Kong affairs. Traders will be watching for signs of progress ahead of a Dec. 15 deadline for further tariffs.“Investors now are starting to worry again that we may not see that phase one in 2019,” said Chris Gaffney, president of world markets at TIAA. “It’s going to be tough to have the next leg up without a trade deal.”Elsewhere, oil futures rose. European bonds tracked Treasuries lower and emerging-market stocks slid.Here are some key events coming up this week:Economic indicators due for release include U.S. and European PMI data for November on Friday.These are the main moves in markets:StocksThe S&P 500 Index fell 0.2% at the close of trading in New York time.The Stoxx Europe 600 Index dipped 0.4%.The MSCI Asia Pacific Index declined 0.7%.The MSCI Emerging Market Index fell 0.7%.CurrenciesThe Bloomberg Dollar Spot Index was little changed.The euro slipped 0.1% to $1.1057.The British pound slid 0.1% to $1.2906.The Japanese yen was little changed at 108.63 per dollar.BondsThe yield on 10-year Treasuries increased two basis points to 1.77%.Germany’s 10-year yield increased two basis points to -0.33%.Britain’s 10-year yield jumped two basis points to 0.75%.CommoditiesWest Texas Intermediate crude gained 2.3% to $58.42 a barrel.Gold decreased 0.5% to $1,464.50 an ounce.\--With assistance from Kyoungwha Kim, Andreea Papuc, Adam Haigh, Cormac Mullen, Yakob Peterseil and Todd White.To contact the reporter on this story: Vildana Hajric in New York at firstname.lastname@example.orgTo contact the editors responsible for this story: Samuel Potter at email@example.com, ;Jeremy Herron at firstname.lastname@example.org, Brendan WalshFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
Australian shares extended losses on Thursday, pulled down by Westpac Banking Corp as accusations of money laundering breaches against the lender rattled the financial sector, which has been in regulatory crosshairs for nearly two years.
China on Wednesday made a slight cut to a key interest rate. Japan’s exports tumbled at their quickest pace in three years in October. Australia’s anti money-laundering and terrorism financing regulator filed for civil penalty orders against Westpac.
(Bloomberg) -- A world-beating stock gain is quickly unraveling in Hong Kong, showing how fast sentiment can change as protests convulse the city.The Hang Seng Index lost 0.8% Wednesday. It had surged 2.9% in two days, with volatility sinking 11% in that time. Short-selling volume reached 16% of total equity turnover -- near a record of 20% in August -- as bears were forced to unwind their positions. Forward points on the local dollar had slumped across tenors, signaling speculators were also retreating in the currency market.Adding to the tension Wednesday was a unanimous vote from the U.S. Senate passing a bill aimed at supporting protesters in Hong Kong and warning China against a violent suppression. China reiterated its threat to retaliate against the bill. It comes after the city just witnessed one of its most violent weekends since the unrest began five months ago.“Very weak fundamentals will take over investor sentiment at some point,” said Hao Hong, head of research at Bocom International. “I’m not making any big calls at the moment. It’s a very short-term trend trade that can disappear very quickly.”Theories on what had supported gains earlier this week range from beaten-down valuations, China’s move to trim borrowing costs to recently improved sentiment toward U.S.-China trade negotiations. Hong Kong’s political situation remains unclear, with any delay or cancellation of local district elections due this weekend a potential flash point for further unrest.The Senate measure would require annual reviews of Hong Kong’s special status under U.S. law to assess the extent to which China has chipped away the city’s autonomy. China’s Foreign Ministry has repeatedly warned that there would be “strong countermeasures” for passing legislation supporting protesters. Hong Kong’s benchmark stock gauge fell below the 27,000 level.“If the bill becomes law, we will see more downside because China will further delay the trade deal,” said Steven Leung, executive director at UOB Kay Hian (Hong Kong) Ltd. “The news may cause some mild profit-taking in the short term after the Hang Seng Index rallied.”The Hang Seng Index rose 1.6% on Tuesday, building on the previous day’s 1.4% advance. Stocks sensitive to the protests, such as property developers, were among leading gainers as were technology shares, which Pictet Asset Management Pte.’s Andy Wong said are generally shielded from the political situation.The gauge trades at just over 10 times the next 12 months’ earnings, a 35% discount to global peers, data compiled by Bloomberg show. But that’s still not appealing enough for some. “I don’t see a huge valuation buffer that attracts me to the market given the protest risks and the damage to Hong Kong’s reliability as a financial center,” said Nader Naeimi, head of dynamic markets at AMP Capital Investors Ltd.Naeimi, who oversees more than $700 million in assets under management, sold his Hong Kong stocks in May and has been short the city’s equities since September. “There will always be the threat now that it can spark again,” he said of the unrest in an email, adding that he saw the recent rebound as bargain hunting on expectations that the worst might be over in Hong Kong. “I doubt it will be the case. ”With little visibility as to how the protests will play out, others see Hong Kong stocks as too risky. “There is little hope that a resolution to the protests will come any time soon,” said Airy Lau, an investment director at Fair Capital Management Ltd, who exited his Hong Kong stock positions between May and August.“Short-term, the Hang Seng Index is trading near the bottom of its trading range and may go up. It doesn’t look like we’re going to see a long-term rebound.”(Updates with market close)\--With assistance from Jeanny Yu.To contact the reporters on this story: Elena Popina in Hong Kong at email@example.com;Livia Yap in Shanghai at firstname.lastname@example.orgTo contact the editors responsible for this story: Sofia Horta e Costa at email@example.com, David Watkins, Philip GlamannFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.