Thousands of protesters swarmed the arrival and departure hall in the Hong Kong International Airport yesterday, forcing the cancellation of all flights in and out of the city. The Hang Seng Index (HSI) suffered another 0.4% decline to 25,824.72 points yesterday as the Malaysian market was shut in conjunction with the public holiday.

Protests Continue in Hong Kong

Air travel in Hong Kong was thrown into chaos as anti-government protesters flooded the arrival hall of the Hong Kong International Airport, but thereafter changed tactics to also swarm the departure hall, therefore forcing the cancellation of all flights in and out of the city at 4pm yesterday (South China Morning Post (SCMP), 12 Aug), leaving thousands of travellers stranded. In a live update by CNN (13 Aug), an airport spokesperson said that the airport will resume flights from 6am this morning (13 Aug).

According to a live update by CNN at about 8:30pm last night, most protesters have cleared out of the airport by then, leaving only a few hundred left, although some protesters had then gathered at the Wan Chai district.

There was widespread anger at the Hong Kong police yesterday, after a female protester was injured in the eye on Sunday night following clashes with the police. In the same article by SCMP (12 Aug), Sunday saw Hong Kong rocked by some of the worst violence, with police using tougher tactics such as firing tear gas at protesters in Kwai Fong MTR station and firing pepper balls at close range in Tai Koo station, as protesters swarmed parts of Tsim Sha Tsui, Sham Shui Po, Wan Chai and Kwai Chung.

The Market Reacts

The HSI has seen poor performance in the past few months, lagging behind other global indices as the city was also affected by the protests, on top of other global concerns such as the US-China trade war. The month of August saw the index plunge further, falling below the 26,000 level last week and closing at 25,824.72 points yesterday (-0.4%), down 7.0% month-to-date.

The call and put warrants over the HSI remained popular with investors, contributing a large chunk of last week’s weekly turnover as the Malaysian warrants market saw its hottest week since May. As put warrants move in an opposite direction to the underlying, the put warrants increased in value with the decline in the HSI. For instance, one of the top put warrants, HSI-H6Q, rose from RM0.195 on 31 July 2019 to RM0.500 as at last Friday (9 Aug); the Malaysian market was closed yesterday in conjunction with the Hari Raya Haji holiday.

Meanwhile, the call warrants, which move in line with the underlying, decreased in value with the decline in the HSI. With that, investors accumulated the call warrants at lower absolute prices, causing call warrants HSI-C5P, HSI-C5S and HSI-C5T to remain sold out.

Ensure to check the sold out list on our homepage and the live matrix before trading. Exercise caution when trading sold out warrants as their prices may be inflated by other investors in the market, and generally avoid warrants with wide spreads.

Source: Macquarie Research - 13 Aug 2019