Tens of thousands of protesters have taken over roads around Hong Kong’s legislative building (DALE DE LA REY)

Hong Kong (AFP) – Stocks sank in Hong Kong as the city was hit by huge protests that saw tens of thousands of people block key roads, businesses shut up shop and unions encourage members to miss work.

In scenes that revived memories of the 2014 Occupy movement, traffic was brought to a standstill and government offices blocked as crowds demonstrated against a government plan to allow extraditions to China, which was due to be debated Wednesday.

Campaigners have warned that the law would entangle people in the mainland’s opaque courts and hammer Hong Kong’s reputation as an international business hub. The protests led authorities to delay the reading of bill to “a later date”.

The Hang Seng Index fell 1.59 percent, or 440.82 points, to 27,348.52, making it the worst performer in Asia on Tuesday. 

“Uncertainty on local policies will confuse investors and affect the flows in and out of Hong Kong stocks,” said Ronald Wan, chief executive of Partners Capital International Ltd. “Investors now need to ponder whether or not to pull out of the market given the local events and global factors including the trade war.”

Banks listed on the HSI took a hit, with some announcing the closure of branches near the protest areas. HSBC shed more than one percent, while Standard Chartered, Hang Seng Bank and Bank of China Hong Kong were around two percent lower.

Among other firms, market heavyweight Tencent sank 2.2 percent, while AAC Technologies shed 4.70 percent and New World Development dived 3.93 percent.

The Hong Kong dollar strengthened as the rate banks charge each other to borrow cash — known as the Hong Kong Interbank Borrowing Rate (Hibor) — rose to its highest since 2008 as lenders pulled cash out of the financial system. The rate has been rising for days.

Some observers suggested the increase in Hibor could be down to concerns about fund outflows from the city, though others suggested the money was being used to pay dividends or to meet seasonal demand, which often happens in June. Alibaba’s flagged initial public offering has also been tipped to suck up liquidity, experts said.

Sam Chi Yung, a strategist at Springwaters Financial Securities, said: “Recent political events in Hong Kong are affecting investors’ confidence on the future of the city.

“A stronger local dollar may hurt exporters while surging Hibors mean higher funding costs for companies with more debt.”

The retreat on the HSI was exacerbated by profit-taking after a two-day rally that saw it pile on more than three percent, while investors are also on edge as they track developments in the China-US trade row.

— Bloomberg News contributed to this story —

Disclaimer: Validity of the above story is for 7 Days from original date of publishing. Source: AFP.