Hong Kong will continue to push down the financial markets!



The controversial extradition proposal in mainland China continues to press hard Asian financial markets and will have negatively impact in Europe and US.

According to Kari Lam, Hong Kong's chief administrator, the city's unrest will push not only him, but the entire region into an "economic chasm".

What to expect, will the unrest soon stop?

Looks like - no! The main reason for this is that there is still no clear answer from the city's rulers about whether they will comply with the protesters. Even if this happens in the near future, it will take a very long time to rebuild the financial center, as negotiations and discussions on possible solutions to the crisis require dialogue between the parties.

What should we expect from the markets?

Asian indices and especially those in the region will remain under pressure, further aggravating the negativity generated by the trade war and pushing them to new bottoms. In such situations, short-term traders are better off targeting short positions with every upward correction, and from a long-term perspective, the price drop opens a very good investment opportunity - buying cheap. However, we must not rush into purchases! What we need to keep in mind is that Asian asset prices should be in a zone of strong support and only then should we make long-term purchases.

With regard to Europe and the US , it is better to pay more attention to companies that are directly related to the Hong Kong region and look for short-term short positions or a suitable hedging instrument.

Given the low liquidity in August, the escalating tensions in Hong Kong, and the uncertainty surrounding the trade war, I expect global index pressures to continue, without excluding the formation of new bottoms in the US and Europe.

Source: Bloomberg Finance L.P.

 Trader Petar Milanov

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