By Enda Curran
HONG KONG--Hong Kong banks shut branches, suspended some
services and activated contingency plans on Monday as pro-democracy
protests gripped several parts of the city.
Businesses across the city activated backup plans to deal with
the disruption from thousands of protesters who have gathered in
locations throughout downtown Hong Kong in key business and
shopping districts and across Victoria Harbour in parts of
Kowloon.
Standard Chartered Bank PLC, HSBC Holdings PLC, Bank of East
Asia Ltd., Bank of China Hong Kong and China CITIC Bank
International Ltd. were among those who said their operations were
affected by the protests. The banks said they were temporarily
closing branches or shutting off services in affected
locations.
By early Monday, 17 banks had closed 29 branches, offices or
cash machines across the city.
Other companies in the financial sector were also affected. KPMG
LLG advised its 1,800 employees in its Central and Causeway Bay
offices to work from home, according to a spokesman. Central, the
main business district in Hong Kong, and Admiralty, where the
government offices are located along with the shopping district of
Causeway Bay have been focal points for gatherings by the
protesters.
Accounting firm Ernst & Young LLP said it has put in place a
contingency plan in which employees can work in an office away from
the central business district, or work from home.
BlackRock Inc., the world's largest money manager, told any
nonessential employees to work from home Monday, according to
people familiar with the matter. BlackRock is located in Hong
Kong's Cheung Kong Center, which is close to the main protest area.
Fellow money manager Fidelity Worldwide Investment is operating
"business as usual," according to a spokeswoman.
Stocks in the city began falling after the market opened. Hong
Kong's benchmark Hang Seng Index fell as much as 2.5% in early
trading Monday, but retraced some ground later.
Hong Kong, a former British colony which returned to Chinese
rule in 1997, operates independently from the mainland and has
thrived as a financial center over the years, especially as a
gateway to China. But bankers and traders said that if the
pro-democracy protests continue, the contingency planning by
financial institutions, which includes allowing staff to work from
home, may not be enough to cope with severe disruption in one of
the world's biggest financial hubs.
Hong Kong's reputation as a key hub for global capital entering
Asia could be hurt if the protests worsen, said Philippe Espinasse,
a former investment banker in the city who now writes on banking
and finance.
"At the end of the day, the markets are all about confidence and
sentiment," Mr. Espinasse said. "Investors very much like
visibility and certainty and could therefore become concerned about
the stability of the market if the situation deteriorates
significantly," he said.
The Hong Kong Monetary Authority, the city's de facto central
bank, said it has activated its own contingency plan and is ready
to inject liquidity into the banking system. The HKMA said it
expects the city's money markets to operate as normal.
"The banking sector has ample liquidity and does not experience
any tight conditions," the HKMA said in a statement late
Monday.
Charles Li, chief executive of Hong Kong Exchanges &
Clearing Ltd., which operates the city's stock exchange, said
trading is proceeding as usual and while there will be some
volatility in the short-term, the exchange has contingency measures
to deal with a variety of scenarios.
Shares in real-estate firms with large retail property
portfolios were particularly hard hit Monday by worries that the
disruption in Hong Kong would take a toll on tourism numbers from
China this week, the start of the mainland's National Day "golden
week." Millions of visitors from China, especially through tour
groups, usually come to shop in Hong Kong this week.
"Hong Kong asset prices are bound to drop, and the Hong Kong
dollar is already suffering," analysts at Crédit Agricole wrote in
a note to clients on Monday.
The Hang Seng Index closed down 1.9% at 23,229.21, hitting its
lowest level in 2 1/2 months, led by sharp declines from
real-estate developers and shopping-mall operators.
Companies that count on China's Golden Week holiday for
increased traffic were hit hard. Beauty-products retailer Sa Sa
International Holdings Ltd. fell 3.1% to HK$5.31. Clothing-retailer
IT Ltd. tumbled 5.6% to HK$2.69.
Blue-chip shares of Wharf (Holdings) Ltd., one of the city's
major office and retail landlords, fell as much as 6.2% during the
session. It pared losses by the close of trade, settling with a
3.8% loss at HK$55.20. New World Development Co. fell 4.6% to
HK$9.19 and Cheung Kong (Holdings) Ltd. lost 3.7% to HK$129.70.
In London trading, HSBC Holdings PLC fell 1.8% and Standard
Chartered PLC was down 2%.
The Hong Kong dollar, which operates under a linked exchange
rate regime with the U.S. dollar, slipped to a six-month low
against the greenback in early trading before recovering some
ground.
The financial sector waded into the debate over planned protests
in June when the Big Four accounting firms--Ernst & Young,
PricewaterhouseCoopers, Deloitte LLP and KPMG--took out an ad in
local Chinese-language media expressing worries about possible
disruption.
The same month, two of Hong Kong's biggest lenders, HSBC and
Standard Chartered, drew the ire of democracy protesters over
claims they pulled millions of dollars of advertising from the
Apple Daily, a popular Hong Kong newspaper known for its tendency
to criticize China.
Andrew Colquhoun, Head of Asia-Pacific Sovereigns at Fitch
Ratings said Hong Kong faces two key questions, namely whether the
city can resolve its political issues so there is a government that
commands "basic popular consent to implement economic and
structural policies" and whether "the political standoff eventually
impacts domestic and foreign perceptions of Hong Kong's stability
and attractiveness as an investment destination."
"But those questions will likely be answered over months or
years rather than days," he added.
Yvonne Lee, Chao Deng, Mia Lamar, Gregor Hunter and Anjani
Trivedi contributed to this article.
Write to Enda Curran at enda.curran@wsj.com
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