Energy has been the worst performing sector for the stock market so far this month, with a drop of 10.45%. The shale oil industry has managed to cut costs since the last energy wobble (late-2015). However, there is now another issue confronting investors: shale oil unleashed ‘disruptive technological change’, but the industry faces an almost insurmountable challenge from more cost effective renewables.
Financials are another sector facing ‘intense technological disruption’. Financials are the second worst performing sector this month (-7.9%). It is easy to blame this poor performance on Treasury yield curve inversion, but again, the spectre of intense competition looms large.
The more immediate risk for financial markets, however, is Hong Kong, and China’s propensity to intervene. Cathay Pacific has been warned that it will ‘pay a painful price’ after staff allegedly joined protests at the airport last week. Today, Cathay Pacific’s chief executive resigned in response to the criticisms.
More worryingly, trucks and armoured vehicles have amassed in the Shenzhen Bay Sports Center, just across the ‘border’ from Hong Kong. Sending in the People’s Liberation Army (PLA) or the People’s Army Police (PAP) would, in the eyes of some, hasten the collapse of foreign investment into Hong Kong, invite further trade sanctions and accelerate the downturn in China’s economy.
