Hong Kong’s political crisis isn’t a deal breaker for investors right now

Protests have paralyzed many parts of Hong Kong for months, trashing its retail economy and prompting an outflow of money to Singapore. But most investors still see the city as an important gateway to Asia — and barring a major shock,that’s unlikely to change anytime soon.

This week was the latest lesson in contrasts for the region’s premiere financial hub. Tuesday’s massive protests — which culminated in a protester being shot with a live round by police — marked one of the most chaotic days of the political unrest thus far. A day later, the city’s government announced that retail sales plummeted in August.

But Hong Kong’s status as a financial powerhouse is holding steady. The day before Tuesday’s violent escalation, Anheuser-Busch InBev (BUD) listed its Asia business on the Hong Kong Stock Exchange (HKXCF), raising $5 billion in the second biggest IPO of the year after Uber (UBER).

That deal pushed the amount of funding raised on the Hong Kong exchange to the third highest in the world this year after the New York Stock Exchange and the Nasdaq, according to research from Deloitte.

“Budweiser’s IPO is a vote of confidence for Hong Kong,” said Kenny Tang, chief executive for Hong Kong-based Royston Securities.

Still, some investors are beginning to get cold feet. Analysts at Goldman Sachs estimate that $3 billion to $4 billion fled from Hong Kong to Singapore in August, according to a report published this week. But that’s a small fraction of Hong Kong’s total cash pool: The city has deposits worth 6.84 trillion Hong Kong dollars ($872 billion), $650 billion in US dollars and smaller amounts in other currencies, according to data from the Hong Kong Monetary Authority, its de facto central bank.

“The protests have caused some investors to transfer their assets to safer places,” said Louie Shum, president for Sincere Securities.But he described the amount as “modest.”

If Hong Kong’s economy gets worse, more money could flow out of Hong Kong, Shum added. But he said he doesn’t see a massive flight of capital happening unless there is a “major escalation” of the city’s political issues — such as a significant military intervention. He sees little risk of that right now, though.

Eddie Yue, the new chief executive of the Hong Kong Monetary Authority, said Wednesday the city’s financial system is sound and solid, and that there is no “obvious” capital flight.

Hong Kong’s benchmark equity index has also rebounded from its lows in the past few weeks. The Hang Seng Index (HSI) rose 1.4% in September after two consecutive months of losses.

Tang, the Royston executive, said that the index is largely a reflection of China and global economic factors, since most of its components have a big business presence in China.

“The US-China trade war is a more significant theme to the market,” he said. Tang also pointed out that the United States and China have recently shown some goodwill toward each other, fueling hope for progress ahead of the next round of trade talks.