Tiananmen Square 1989: The View from Financial Markets

Abstract

This paper examines the effects of the Tiananmen Square incident on Hong Kong stock prices, which fell by more than 22% on the first day of trading after the event. Notwithstanding expected negative across the board impact, we find some partial protection from the worst of the negative effects was enjoyed by investors in utility stocks and companies with ownership ties to mainland China. Whereas some of the harder hit sectors enjoyed some degree of catching up after the first two months after the crisis, continued underperformance is seen for the hotel and property sectors throughout the empirical testing. The most domestically-focused sectors therefore were also the ones that experienced the most lasting damage.

Keywords: Tiananmen Square; stock prices; Hong Kong; event study

JEL Classification: G15