(Bloomberg) -- Equity traders cheering the prospect of a restoration of stability in Hong Kong keep getting disappointed.
Stocks fell 0.3% on Tuesday as the city’s leader Carrie Lam offered no new concessions in her first public comments since Sunday’s vote. It follows Monday’s 1.5% gain in the Hang Seng Index, partly triggered by a landslide election victory for pro-democracy forces. Some analysts were predicting the results would force the government to address issues that have fueled the unrest.
It’s getting increasingly difficult to have a view on Hong Kong’s equity market. Despite violent street protests and events such as a university siege, stocks have shown a tendency to revert to the mean for the better part of four months. The Hang Seng Index is more than twice as volatile as when protests began in early June, even though the index is basically flat.
“When you have a very wide range of outcomes, it becomes difficult to come up with a specific view or build a reliable trading or investment model,” Isaac Poole, chief investment officer at Oreana Financial Services Ltd., said by phone. “Market sentiment and market momentum become key drivers. It’s not an easy environment.”
This month has been particularly tricky for anyone trying to time the market. Hong Kong stocks lost $118 billion in value on Nov. 11, their worst day in more than three months, after police shot and wounded a protester. A week later they rose, despite a dramatic standoff between protesters and police at a local university. A short squeeze then followed, stoking the world’s biggest gains. That ended after only two days.
For investors tired of the whiplash, hopes were high that another day of gains for the Hang Seng Index on Tuesday would provide a much needed breather. But even if the weekend’s peaceful vote removed some near-term uncertainty, stock bulls have plenty of reasons to stay on the sidelines. Turnover in Hong Kong was below this year’s average for 14 straight days before Alibaba Group Holding Ltd.’s debut, showing a lack of conviction either way.
“Now that the election is out of the way, markets will turn to fundamentals,” said Hao Hong, head of research at Bocom International. “If you look at economic fundamentals, they are deteriorating. Investors will eventually have to focus on that.”
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