- Media tycoon Jimmy Lai was arrested in Hong Kong Monday. Over the next 36 hours the value of the shares of the company he founded shot up more than 13 times.
- Other listed companies identified as pro-democracy, known as ‘yellow businesses’, also benefited from a surge in activist investment. Commentators in online forums called for investors to buy shares in these businesses.
- The moves in the stock market underscore a new phenomenon of a link between economics and politics, a link that is particularly visible in Hong Kong where finance and stock investment are incredibly intertwined with life in the city.
Rarely does an arrest lead to a historic surge in the value of a stock but that is exactly what happened in Hong Kong this week after Jimmy Lai Chee-ying, a media tycoon and vociferous anti-Beijing activist was arrested under a new national security law.
The stock in Next Digital, the parent company of the Apple Daily newspaper, shot up by more than 1,000% at one point before closing up 331% for the day.
Next Digital’s stock (HKG: 0282) has been languishing in the doldrums for years. It peaked at around HKD4.45 (US$0.57) back in 2006 and has been falling ever since with a short-lived spike at the end of 2012. On the morning of Monday, August 10, the stock was trading at HK$0.08. By the end of the trading day Tuesday the stock was worth HK$1.10, almost 14 times more. At one point, it hit HK$1.61.
The shares picked up momentum after police arrested Lai on Monday and then raided the offices of Apple Daily.
The massive hike gave the company a market capitalization HK$2.9 billion, orders of magnitude higher than just 32 hours earlier.
Trade volume of the group’s stock topped 4 billion shares on Tuesday. By comparison, the second most traded stock on the Hong Kong Stock Exchange (HKEx) was I-Cable Communications (HKG:1097) with 954 million shares trading hands.
What happened with Next Digital was somewhat counterintuitive (stocks tend to tank when top executives are arrested) and perhaps the most visible and high-profile example of how economics and politics are becoming intertwined in a city where the millions are finely tuned to the gyrations of the stock market. It is hard to envision another city where such a high percentage of the population trade stocks and are involved in finance. Taxi drivers trade shares at red lights. It is common to see groups of older people gathered at the front rooms of banks that are lined with stock tickers.
‘Jimmy Lai owns 70% of the shares of the company. If you support Apple Daily, push up the share price,’ someone commented Tuesday afternoon on LIHKG, Hong Kong’s major online forum. ‘Most importantly, if Lai is forced to sell off his shares, he will still have money to run another Apple Daily.”
‘We are Hong Kongers and finance is our expertise. We don’t have much to contribute, but money,” another user said on LIHKG.
LIHKG has been a popular pro-democracy platform for protesters. The online forum has played an important role in mobilizing citywide protests throughout the last year including a now shelved extradition law and, this year, the national security law imposed on July 1.
The miracle of Next Digital’s share price surging to a seven-year high in just two days underscores a new form of protest, shifting at least part of their attention from action on the streets to trading on one of the world’s busiest stock markets.
Other listed companies that identify as pro-democracy also benefitted from the sentiment on Tuesday. Magazine and online media company Most Kwai Chung Ltd (HKG:1716), which runs a satirical magazine and online media platform, saw its share prices double. Shares in MI Ming Mart Holdings Ltd (HKG: 8473), whose owner Erica Yuen and her father Elmer Yuen are outspoken critics of the Chinese government in Beijing, surged 135.48%.
Some have described this protest investment as a shift of the ‘yellow economic circle’ to a ‘yellow financial circle’. Hong Kong protesters have been supporting pro-democracy local businesses and boycotting those favoring the Hong Kong and Chinese governments, creating an economic circle for the like-minded. The businesses that these supporters protest support have become known as ‘yellow businesses’. In 2014, people wore yellow ribbons to show support for pro-democracy protests and the color took on its association with pro-democracy activism.
Discussions about ‘yellow stocks’and ‘national security law concept stocks’ have also emerged in online forums.
The arrest of Lai and a few other senior executives and the raid of Apple Daily’s office on Monday stirred an outcry in Hong Kong, with many denouncing the move as a serious violation of freedom of the press.
Around 200 police officers entered the newspaper building in the early morning and went through documents on reporters= desks, even though the search warrant reportedly did not cover journalistic materials.
Police said Lai and the others were suspected of “collusion with a foreign country or with external elements to endanger national security, contravening Article 29 of the National Security Law, and conspiracy to defraud”.They added that an investigation is underway and more arrests are possible.
‘The arrest of the media tycoon marks the most aggressive action yet under new anti-sedition legislation,’ the editorial board of the New York Times said on Monday.
The outcry also supercharged sales for the newspaper. Apple Daily printed more than half a million copies on Tuesday morning to meet the unusually high demand, after online campaigns called on people to buy it as a show of support.
With the surge in the stock, some people worry that regulators might see the move as price manipulation and may even consider suspend trading of the stock.
But others remained optimistic, saying it is mostly retail investors who are buying the stock and Hong Kong remains a free market.
“[If trading is suspended,] then foreign countries will know that Hong Kong’s status as a financial center is undermined,” one user commented.