Stormy weather washes away $5 billion a day

Hong Kong loses an estimated HK$5 billion a day on average whenever the city shuts down due to severe weather, with Hong Kong Exchanges and Clearing (0388) unable to cash in on a daily turnover of HK$80-90 billion and property agents missing out on HK$15 million worth of commissions.

More than 70 percent of the economic activities in the city are affected or even halted when typhoon signals number 8 or above or black rainstorm signals are hoisted.

That translates to a loss of HK$5.4 billion in gross domestic product per day based on the city last year's GDP of HK$2.8 trillion, though some of the impacts from the suspension could be mitigated later when normal business activities resume.

Among them, the cancelation of tradings in stocks, bonds, and derivatives not only affects investors but also reduces the revenue for both HKEX and the government.

The exchange's sales from a 0.00565 percent trading fee are projected to be reduced by HK$4.5 million a day from the trading suspension if the market turnover is HK$80 billion. And the government would also fail to gain HK$104 million in stamp duty from tradings.

The disruption also affected initial public offerings and the Stock Connect northbound trading, which allows foreign investors to tap into the mainland stock market.

The direct economic loss from typhoons in Hong Kong last year was estimated to be HK$20.9 million, according to a report from the Hong Kong Observatory with data from government departments and public utility companies.

Trading halts due to severe weather are seen as increasingly antiquated given that the global finance industry adjusted to remote working amid the pandemic. They are also likely to be increasingly inconvenient, as extreme weather events linked to climate change grow more common.

With most orders now received and executed electronically, the case is growing for Hong Kong to ensure continuous trading in bad weather. While the open outcry of the Chinese Gold & Silver Exchange closed, the electronic trading platform still opened for the full day.

And rival hub Singapore has never halted trading at its stock exchange due to weather-related events.

Financial Secretary Paul Chan Mo-po said earlier this year that the city will explore arrangements to allow stock trading under severe weather.

The A-share market, which also remained open yesterday, declined as China's economic data missed expectations.

The SSE Composite Index fell by 0.87 percent and the SZSE Component Index by 0.63 percent.

Hong Kong stocks are expected to follow the declines today.