Stocks in Hong Kong fell nearly 3% after an official warned that a recession is likely as protests continue to grip the Asian financial hub.
Financial Secretary Paul Chan said Aug. 5 that Hong Kong risks a recession in the third quarter amid persisting global trade tensions and the domestic economy's weakness, China News Service reported. Hong Kong's economy contracted 0.3% in the second quarter compared to the prior three-month period, according to the Census and Statistics Department.
Chan spoke along with Hong Kong Chief Executive Carrie Lam and other top officials as demonstrators disrupted train services and sparked flight cancellations as part of months-long protests.
In a media address, Lam said the ongoing demonstrations were pushing Hong Kong to the verge of an "extremely dangerous situation" and pledged to maintain law and order, Reuters reported. Lam indicated her intention to stay in her role, rejecting repeated calls for her to step down.
The Hang Seng index plunged 2.89% by noon local time, with all of its constituent companies posting declines.
Hong Kong has been rocked by massive street protests since early June amid opposition to a controversial extradition bill, which Lam described as "dead" last month.
A report by IHS Markit on private sector conditions showed that Hong Kong's purchasing manager's index sank to 43.8 in July from 47.9 in June, marking its sharpest deterioration in a decade.
Bernard Aw, principal economist at IHS Markit, said the decline reflected "worsening demand conditions brought on by an ongoing U.S.-China trade war and an escalation in large-scale political protests in Hong Kong."
"The survey is now broadly indicative of the economy contracting at an annual rate of around 2.0%," Aw said.