‘Fear gauge’ in Hong Kong stock market spikes as Credit Suisse, SVB drama unfolds in Europe and US

391bd76b 7bc2 4f41 8f8b 9d23f219a449 9a7011a2

by Jiaxing Li at scmp.com

The banking crisis in the US and Europe may be taking place more than 8,100 kilometres away from Hong Kong. Still, stock investors are feeling the tremors closer to home as the drama unfolds, stoking volatility as parallels are drawn with the 2008 financial crisis.

The Hang Seng Volatility Index, known as the fear gauge, climbed to 31.09 on Monday, the highest since December 13, according to compiler Hang Seng Indexes Company. That is higher than the average level of 25.8 this year, 29.1 in 2022 and 20.8 in 2021.

The reading implied there was a 68 per cent chance the city’s benchmark index could swing 9 per cent either way from its closing level on Monday, or to between 17,295 and 20,706, the compiler said in a note on Tuesday. The volatility was exemplified by the wild swings in HSBC, AIA Group and Alibaba Group Holding stock prices this week.

“There are still a lot of uncertainties in restoring market confidence after the banking crisis, despite regulators worldwide rushing to the rescue,” Zhang Yusheng, a strategist at Everbright Securities in Shanghai, said in a note on Tuesday. “The panic and risk-aversion will continue driving up market volatility in the near term, and Hong Kong stocks are likely to go through multiple corrections.”

A spike in the volatility index to above 40 would be associated with only three recent significant events since the start of 2020, namely the Covid-19 outbreak, US-China geopolitical tensions and the slump in China’s property market. The index compiler did not immediately reply to an email seeking comment.


Leave a Reply