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Hong Kong Markets Are Calm as Protests Linger and a Recession Looms

  • Gauge of volatility in Hang Seng Index is at lowest since July
  • Investors are on high alert for signs of fund outflows
A demonstrator makes a barricade in Hong Kong on Oct. 20.

A demonstrator makes a barricade in Hong Kong on Oct. 20.

Photographer: Justin Chin/Bloomberg
Updated on

The economy is heading for a recession, violent protests show no sign of easing and yet Hong Kong’s financial markets are enjoying an unusual period of calm.

A gauge of Hang Seng Index volatility has fallen more than 20% this month to the lowest level since mid-July, while the local dollar has barely moved in weeks. Even U.S. speculators are giving up, after their bearish bets in August sent short interest on a Hong Kong stocks fund to a six-year high. The city’s interbank borrowing costs have also eased, a sign of looser liquidity.