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Closing figures for the Hang Seng Index displayed on a screen in Central on September 4, the day Chief Executive Carrie Lam formally announced the withdrawal of the extradition bill. Photo: Tory Ho
Opinion
Richard Harris
Richard Harris

What was behind the Hong Kong stock market rise ahead of Carrie Lam’s withdrawal of the extradition bill?

  • Many hours before Carrie Lam appeared on TV, and well before reports that the bill’s withdrawal was imminent, the Hang Seng Index had begun to rise
  • Did anyone trade on the information before the mainstream press reported it? It would have been magical for the market to go up on no news

The Hong Kong government’s change of policy to withdraw the fugitive offenders bill last week was a U-turn – a brave one.

Of course, the announcement came far too late and it doesn’t go nearly far enough; that is the nature of these things. But it is one step towards much-needed changes in Hong Kong’s government. Reform will have to continue if the 2 million who marched in June are not to march again in future – that would be a lot more dangerous to Hong Kong’s economy than a few smashed-up MTR ticket machines.
Nevertheless, the rioters who ransacked the stations were out of control and out of order, and get no support from those who marched against the extradition bill on June 16. They are the very people who should be smart enough to filter out the fake news that people died at the hands of the police.

Instead, they have sought to destroy their own home. This is not demonstrating for freedom but mindless retribution and vandalism – just because you can do it.

The protesters’ five demands were always going to be an impossible goal as a package. No government could agree to all; but reform is a marathon not a sprint, and demands will come and go with the seasons, some blossoming and others withering.
This is a transition time for Hong Kong in many ways. We have crossed the line that has turned genuine protesters into thuggish rioters performing criminal acts.
The hatred against the government, the police and, by association, the MTR, is palpable, but the vandalism has no origin in legitimate grievances. It will lose its driving force, and the clarion cries for retribution for perceived injustices that happened during the pitched battles will fade.
The police are getting slightly smarter about handling protests, as we saw with the protection of the airport last week. The demonstrators will sooner or later withdraw and declare victory.
We live in hope that the government is not distracted in its mellowing stance by this violence, that the police will continue to increase their arrests (though not delivering summary justice by whacking whoever happens to be in the way), and the courts are strict on those convicted of vandalism.
The government now has to deliver peace and reform. The increasing irony is that this is now more likely to be guided by the central government through backchannels, the only group stronger than the cartels and vested interests that have glued up Hong Kong. This is not a bad thing, if the “one country two systems” policy remains uncompromised.
Some things need to change sooner. The Chief Executive’s Office still leaks like a rusty sieve. It would have been known that Carrie Lam Cheng Yuet-ngor’s announcement would have had a strong positive impact on stock market prices.

Her televised message on the withdrawal of the bill was broadcast just before 6pm on September 4. The Post first reported on the imminent announcement about four hours before, around 2pm Hong Kong time, with media around the world quoting the Post minutes later.

The protesters had amusingly dismissed the reports, which they must have regarded as accurate, by 5pm and later branded the withdrawal as a “band aid on rotting flesh”. Allowing for production time, the press must have had the news over lunch.
After a big fall in prices following escalated clashes on August 25, the Hang Seng Index had been treading water at the 25,550 level, ending September 3 at 25,528. Amazingly, on September 4, the market opened up half a per cent at 9.30am and, within two minutes, it was already up 1.2 per cent at 25,835.

Hang Seng surges on SCMP report extradition bill to be formally withdrawn

It held this level for the rest of the morning and through lunch, and then, at 1.55pm, it began to climb steeply. The market rose another 2 per cent to 2.13pm (covering the period of the Post’s report). It continued to rise to 3.45pm, when it peaked at 4.4 per cent higher for the day, only to settle back to 26,523 on profit-taking at the close, up 3.9 per cent up on the day. The Hang Seng has since then been treading water.

Did some insiders get rich off the back of the disturbances or was the chief executive’s statement just left on the photocopier?
Why did the market move early? Was it especially smart? The chief executive’s announcements have previously been repetitive and anodyne – so good news was unlikely even if an announcement was known to have been coming.

Who, if anyone, leaked the non-public price-sensitive information? Only the most senior people in the community would have known.

Did anyone trade on the information before the mainstream press reported it? Otherwise, it would have been quite magical for the market to have gone up as it did on no new news.

And who did trade? (It is less hard than it was to find that out these days). Did some insiders get rich off the back of the disturbances or was the chief executive’s statement just left on the photocopier? I think we should be told.

Richard Harris is chief executive of Port Shelter Investment and is a veteran investment manager, banker, writer and broadcaster, and financial expert witness

This article appeared in the South China Morning Post print edition as: Unanswered questions
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