Hong Kong’s stock market closed today as authorities sought to brace for the mainland sell off.
Hong Kong stock markets were closed, while mainland stock exchanges closed.
The Shanghai Composite Index closed down 0.7% to 17,817.24 points.
The Hang Seng Index closed up 0.3% to 16,062.75 points.
Hongkongers’ appetite for the Chinese yuan, a currency used as a global reserve currency, has been a major driver of the market’s fall in value.
The Shenzhen Composite Index of listed companies closed down 1.4% to 2,721.25 points.
Hong Kong’s share of China’s gross domestic product (GDP) in the second quarter of this year was just 0.6%.
The benchmark index of fixed-asset companies in Hong Kong was up 0,832.12 points to 1,845.24.
“The mainland’s currency depreciation has been one of the biggest forces for Hong Kong market’s drop in value, and the market is likely to continue to be subject to a negative impact of any change in exchange rates, the Hong Kong Stock Exchange said in a statement.
As the central bank sets out a target of 8% growth for the economy by the end of this decade, the stock market is expected to be hit by a sell-down of between 7% and 10% over the next two months, according to Hong Kong-based Capital Economics.
Hongks’ appetite is likely also to be a factor in the mainland’s stock sell-offs.
A mainland fund manager at a Hong Kong fund said the mainland had sold assets to the Hongkong Stock Exchange at a steep discount to the value of the underlying shares.
In the case of a Hongkongs equity fund, the market was expected to sell shares for the same price as the underlying equity, the fund manager said.
HongKongers also want to sell their own assets, especially in the stock and property markets.
They have already been hit hard by the yuan devaluation and the introduction of the Chinese currency peg, which devalues the value in Hongkoungs own currency against the US dollar.
According to the Global Financial Markets Centre, China’s economy contracted for the third straight quarter last year.
Hong Kongers, who are predominantly pensioners, have been the hardest hit.
The Hong Kong economy shrank by 2.2% in the three months to March, the third consecutive decline.
But in recent weeks, the central government has been making efforts to ease the squeeze on the economy.
It has slashed subsidies for housing and has tightened restrictions on mainland visitors.