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HSBC downgrades Hong Kong stocks outlook, ‘cites’ protests ‘Occupy Central’ could sour relations with China and hurt economy: report

HONG KONG, July 8, (AFP): Activists Tuesday questioned an HSBC report which downgraded Hong Kong’s investment outlook due to fears over a pro-democracy movement — but was then altered to tone down the emphasis on public unrest. Discontent in the semi-autonomous Chinese city is at its highest in years, with tens of thousands taking to the streets last week to protest at Beijing’s insistence that it vet candidates before a vote in 2017 for Hong Kong’s next leader. HSBC’s third-quarter global equity report on Monday cut the former British colony’s stock market, one of the region’s biggest, to “underweight”, a rating it uses to describe underperforming stocks. “We reduce Hong Kong to underweight on concerns about negative news flow. ‘Occupy Central’, a campaign for greater democracy, could sour relations with China and may hurt the economy,” the report said. The Occupy Central campaign — strongly criticised by Beijing — has pledged to stage a mass sit-in at the main business district, where HSBC’s Hong Kong offices are based, unless city leaders commit to acceptable electoral reforms.

However, HSBC’s report was later amended to emphasise other concerns. The updated report said the new rating was due to “the risk of weak residential real estate prices, the slowdown in mainland tourist arrivals, the market’s link to US interest rates... and weak earnings momentum”, before mentioning Occupy. An HSBC spokesman refused to comment on why it had been changed. “HSBC is a respected financial institution and their reports must be under very strict scrutiny before they are released, so it’s very strange for it to be changed in such a way,” Occupy organiser Benny Tai told AFP. “As a reasonable person, one could suspect political factors were behind (it).” Tai said the sit-in campaign would be peaceful and “beneficial” to Hong Kong’s economy in the long-term. Independent financial analyst Francis Lun believed that HSBC had issued the original report to please the Chinese government.

“Now they’re trying to distance themselves, even they realise that they made a mistake,” he told AFP, adding that business confidence in Hong Kong was undented. “Beijing is trying to galvanise the pro-Beijing camp and the businesses, trying to get everyone to toe the central government’s line,” Lun said. Beijing’s state-run media has called the Occupy Central plan illegal and said it could damage the city’s economy, while some local business groups have run newspaper advertisements opposing it. An executive of the pro-reform Chinese-language newspaper Apple Daily alleged in a Wall Street Journal interview last month that HSBC and Standard Chartered had pulled advertising from the paper in late 2013 after a request by Beijing. Neither bank has confirmed the report.

More than 500 people were arrested when police cleared a sit-in protest in Central, following a major pro-democracy march on July 1 to mark the anniversary of the city’s handover from Britain to China.
Beijing has promised to let all Hong Kong residents vote for their next leader in 2017 — currently a 1,200-strong pro-Beijing committee chooses the chief executive. But it says candidates must be approved by a nomination committee, which democracy advocates fear will mean only pro-Beijing figures are allowed to stand. The city was handed over from Britain to China in 1997 under an agreement that guarantees civil liberties, including the right to protest.


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