The world has struggled through the first half of 2020 due to the economic devastation caused by the coronavirus but with governments and central banks injecting liquidity into the economy and financial system, stock markets have rebounded significantly, while a lot of negative factors have remained hidden.

But as the pandemic is still not under control, the recovery may be slower than expected so it is believed that the global stock market party that began at the end of March will also peter out.

We should all get back to reality because there are more negative factors waiting for us in the second half of this year. There have been projections of the S&P 500 dipping to 2,700 as well as overly optimistic forecasts, but the biggest worry is that several negative factors have now made Hong Kong's market more volatile than others.

For starters, don't get too excited about the Hong Kong dollar's strength, because Hong Kong stocks were very strong before they peaked in August 1997, as well as in November 2007, before the plan for the through-train stock trading scheme was dropped.

In 1997, there was even the concept for new stocks and regional funds poured into Hong Kong because currencies such as Thai baht were being attacked.

But it can take less than a week for the Hong Kong dollar to weaken rapidly. Current capital inflows into the Hong Kong dollar and the inflows before the financial crises of 1997 and 2007 are all of the same nature - hot money seeking quick profits.

Once profits are earned or an impending crisis is perceived, investors will quickly drain away cash without a second thought. Therefore, the so-called strength of the Hong Kong dollar should not be confused with whether there is a potential financial crisis in Hong Kong or not.

So, aside from the pandemic, what else should we worry about as we enter the second half of 2020?

First of all, the national security law will lead to a response by the United States and other western countries. The US Senate has now passed the Hong Kong Autonomy Act, and it is likely that the House of Representatives will pass the bill in the near future, before sending it to President Donald Trump's desk.

Because of the bill, priority will be given to economic sanctions, visa restrictions and freezing of assets against China. At the same time, exports of goods or technology to sanctioned enterprises will be restricted, and investment in financial securities such as stocks and bonds will be prohibited.

When the United States imposed sanctions against Russian in 2018, Rusal (0486) suffered a huge plunge to its price in Hong Kong, so the Hong Kong Autonomy Act will definitely bring potential blows and risks to Hong Kong's financial market.

Also, with the gradual but inevitable deterioration of Sino-US ties and the passage of the national security law, international investors will become more wary of Hong Kong. This explains why the Hang Seng Index has lagged behind other markets since May.

We also need to closely monitor the upcoming US presidential elections in November. If Trump continues to lag behind in approval polls, his actions could become even more unpredictable.

At the same time, it would be naieve to think that a victory by Democratic candidate Joe Biden would help normalize Sino-US ties, as Europe and the United States might then become even closer, making it harder for China to find western allies.

Thus, the next six months could be worse for global markets than the first half, especially in Hong Kong.

Andrew Wong is chairman and CEO of Anli Securities

Buckle up for tough second half