The Hong Kong stock exchange suspended trading Tuesday as Typhoon Nangka traced China's southern coast and prompted the government to raise the city's third-highest typhoon signal.
The storm is Hainan-bound, moving at roughly 22 kilometers per hour away from Hong Kong toward China's southernmost province.
"As the typhoon signal No. 8 is in force, all trading sessions in the Hong Kong securities and derivatives markets, including after-hours futures trading, have been suspended today," the exchange announced at noon Tuesday, following the cancellation of morning trading activities.
HKEX policy mandates trading will be suspended for the day if the No. 8 signal doesn't drop by lunchtime and in a noon update, the Hong Kong observatory said it was unlikely the signal would be downgraded before evening.
The city's stock exchange, with a $41 trillion market capitalization as of September 2020, was last shut in August during Typhoon Higos but opened later that same day for afternoon trading.
Raised at 5:40 this morning, the No. 8 signal alerts residents to wind speeds exceeding 63 km/hr - by midday Tuesday one island weather station recorded gusts reaching 93 km/hr.
Schools, businesses, courts and tourist attractions shut down for the day, while most public buses and ferries suspend services. Four temporary Covid-19 testing centers around the city also stayed closed Tuesday.
One person sought medical treatment at a public hospital in the afternoon for typhoon-related injuries according to Hong Kong's health department.
Market Authorities Braces for Another Type of Storm
As the city faces the lashing of Nangka's wind and rain, the Hong Kong Monetary Authority announced Monday that financial institutions will continue to comply with a countercyclical capital buffer (CCyB) ratio of 1.0 percent.
"The economic environment in Hong Kong is still subject to a high level of uncertainty at the moment," said the authority's chief executive Eddie Yue Monday.
The city's markets have been buffeted by the US-China trade war as well as massively reduced retail sales due to ongoing social unrest and pandemic-induced social distancing measures.
"It is therefore appropriate to keep the countercyclical capital buffer ratio unchanged and continue to monitor the situation for the time being," he added.
Many jurisdictions keep the CCyB around zero, and an elevated buffer ratio is a sign that authorities expect market volatility in the near future.
In times of need, the buffer ratio helps reduce pressure as economic recovery begins - a role the government has likened to a "shock absorber" he said.
Determining the buffer ratio is not a purely quantitative process. The government takes into consideration a so-called "buffer guide" based on the balance of credit to gross domestic product as well as the ratio of residential property prices to rentals.
Data from the second quarter of 2020 suggests a buffer of 2.5 percent according to the HKMA, while "the projection based on available data [for Q3 2020] suggests an indicative buffer guide that signals a lower buffer ratio."