Hang Seng, Coronavirus, Omicron Variant, Federal Reserve – Talking Points
- Omicron Covid variant sparks widespread fears over lockdowns and restrictions
- Constant threat of regulatory intervention continues to weigh on gaming, tech sectors
Equities in Hong Kong remain under pressure as the emergence of the“Omicron” Covid variant renewed fears over further economic slowdown. Following a 2.7% decline on Friday, Monday's session saw the Hang Seng Index retreat by another 1%. Casino and gaming stocks have led losses of late, most notably Macau and Sands China. The Hang Seng Index has fallen by 12% in 2021, with many constituents hampered by an ever-evolving regulatory scheme, as well as Covid-related headwinds.
The emergence of the Omicron variant has caused risk-assets globally to shutter, as fears of lockdowns and travel restrictions re-emerge. Both Japan and Israel have already banned all foreign visitors from entering their respective countries, while regional lockdowns and other restrictions have been seen across Europe. Hong Kong has already announced that visitors from countries with cases of the Omicron variant will be forced to quarantine at a government facility for seven days, followed by an additional two week hotel quarantine. These measures heap additional pressure onto Hong Kong's economic reopening.
Hang Seng Index Daily Chart
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Headwinds continue to mount for the Hang Seng, as Fed tightening and regulatory oversight from Beijing continue to weigh on sentiment. With US inflation much hotter than expected, market expectations for Fed rate hikes continue to get pulled forward. Just last week, Goldman Sachs economists revised their forecasts for the Fed to speed up the taper process in January. From a regional perspective, weak growth and the possibility of additional regulatory crackdowns represent near-term impediments for the Hang Seng Index.
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--- Written by Brendan Fagan, Intern
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