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Hong Kong’s First Typhoon Trading Day Tests City’s Brokerages

Flags outside the Exchange Square Complex, which houses the Hong Kong Stock Exchange, in Hong Kong, China, on Tuesday, Jan. 23, 2024. Asian stocks advanced, led by Hong Kong, on news that Chinese authorities are considering a rescue package to stem an extended market slump. Photographer: Paul Yeung/Bloomberg (Paul Yeung/Bloomberg)

(Bloomberg) -- A typhoon is brewing over Hong Kong but for the first time in decades, it’s business as usual for the city’s $5.4 trillion stock market.

Traders, brokers and money managers clocked in on Thursday morning as the financial hub ended a long-standing practice of shutting its markets during severe weather, in a bid to keep up with its rivals. Authorities had issued a so-called Typhoon Signal 8, the third highest, on Wednesday as tropical storm Toraji edged closer, and lowered the alert the following day.

As the trading session got underway, brokerages processed buy and sell orders, while asset managers pored over their spreadsheets to map out the next investment strategy. There were no reports of glitches, although equity trading volumes were 15% lower than the 20-day average.

“To start trading through typhoon today is a historic moment for Hong Kong,” said Edmond Hui, chief executive officer of Bright Smart Securities. “The initiative per se will not boost trading instantly but rather it’s to keep our policy in line with other global markets and remain competitive.”

The move to keep markets open even during severe weather is part of a government push to follow major financial hubs that have scrapped similar rules. The practice of halting trading was seen as being increasingly out of date after the pandemic years showed markets could function even as most workers were stuck at home.

Since 2018, Hong Kong’s markets have been shut on 11 occasions due to poor weather, including four sessions in 2023, the government said in June.

Hong Kong has ramped up efforts to boost its status as an Asian financial hub and revive its initial public offering market, which has been in a slump for more than two years. IPOs in the city have raised about $9 billion this year, a significant jump from $5.6 billion in 2023, which was the lowest since 2001.

A smooth trading session during severe weather conditions may help reinforce Hong Kong’s lead as a major financial center, and boost its stock market. The city’s benchmark Hang Seng Index has climbed about 15% this year, trailing a gauge of global peers which is up 17%.

“Things are going smoothly but it’s less efficient than normal trading days at the office as many brokerage staff need to rely on their small monitors at home to check pricing,” said Thomas Ip, executive director at Gaoyu Securities. “We have advised our clients to rely more on our electronic apps instead of trading desks today for simple executions.” 

While most market participants reported their systems were functioning smoothly, some said they would relocate to the office when the weather improved.

“Our department is fine, we can work at home during the typhoon, we can still use company internal system to access and support the front line,” said Kimmy Tong, global market & FX strategist at Everbright Securities International. “But I am ready to go back to the office when Typhoon 3 signal is issued.”

Approaching Storm

Brokers and traders are bracing for more bad weather in the coming days. Tropical storm Man-yi is heading east of the Philippines, and is forecast to hit southern Luzon island over the weekend, according to the Philippines’ weather agency. It is then set to track northwestward across the South China Sea, potentially bringing rains and strong winds to Hong Kong early next week.

For Alex Au, that might not be a bad thing.

“I actually quite enjoy a typhoon day like this as there are less people on the train and street,” said Au, managing director at Alphalex Capital Management HK Ltd. The train is functioning “just at a lower frequency, but still fine. I can actually work from home, but I do think that I can concentrate better in the office,” he added.

--With assistance from Winnie Hsu, Kiuyan Wong and Mary Hui.

(Updates with comments throughout)

©2024 Bloomberg L.P.