Oct 24, 2019

Capital markets feel the global protest wave

A doll effigy of Chilean President Sebastián Piñera. Photo: Cristóbal Venegas/Anadolu Agency via Getty Images

Violent protests in Chile, an OECD member long known as Latin America's slow, steady and stable credit, continued for the sixth night in a row Wednesday.

Why it matters: Markets are responding much more quickly to the state of unrest, with Chile's capital markets already pricing in negative outcomes.

Details: Blowback against an increase in public transit costs has continued despite the government offering concessions that increase public subsidies and taxes on the wealthy to rein in sky-high income inequality.

  • The Chilean peso saw its worst drop in more than six years on Monday, and its benchmark Ipsa blue-chip index has shed nearly 5%, including the largest one-day fall in two years, since protests began last week.
  • Chile's state-controlled mining company, Codelco, the world's top copper producer, said one of its mines had closed and other industries across the country are bracing for similar stoppages as trade unions have joined with protesters, Reuters reports.
  • JPMorgan strategists say they are selling Chile's stocks thanks largely to the "added social-political instability."

The big picture: Protests have erupted around the globe recently as young people, blue-collar workers and others have turned out to express outrage at austerity measures in Ecuador, law changes in Hong Kong, the jailing of separatist leaders in Spain and against corruption and a lack of economic reform in Iraq, Egypt and Lebanon.

  • "Experts discern a pattern: a louder-than-usual howl against elites in countries where democracy is a source of disappointment, corruption is seen as brazen, and a tiny political class lives large while the younger generation struggles to get by," the New York Times reports.

The bottom line: Hong Kong's protests already have wiped hundreds of billions of dollars from its stock exchange and reduced GDP expectations and real estate values. If oases of stability like Hong Kong and Chile can boil over into chaos, it's likely more is coming and that could put additional strain on the global economy.

Go deeper ... In photos: Violent weekend protests break out around the world

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Chile's political instability is sinking Latin American assets

Data: Investing.com; Chart: Axios Visuals

Chile's peso fell to its lowest value against the dollar on record and the country's stock market dropped to near its weakest since early 2017, as continued violence and protests have pressured the government to rewrite its constitution.

Why it matters: Chile has long been an oasis of stability in volatile Latin America and was consistently among the strongest and most market friendly democracies. But it's now mired in wide-ranging disruption and chaos and pulling down asset values in the rest of the region.

Go deeperArrowNov 12, 2019

Chile's grim economic outlook

A demonstrator throws a stone at riot police on Nov. 13, 2019. Photo: Johan Ordonez/AFP via Getty Images

The unrest in Chile could not have come at a worse time for the country's investors, who had already been facing a wave of economic uncertainty.

What's happening: The economy slowed from 4% growth last year to less than 2% in each of the first two quarters of 2019.

Go deeperArrowNov 14, 2019

Hong Kong's unemployment rises as protests heat up

Police and protesters clash in the Hung Hom district of Hong Kong on Monday. (Photo: Ye Aung Thu/AFP via Getty Images)

The unemployment rate ticked up to 3.1% in Hong Kong last month from 2.9%, according to new data released by the government on Monday.

Why it matters: The standoff between pro-democracy protestors and police isn't letting up — capping a stretch of the bloodiest clashes between police and protesters since the protests began in June. Monday's data adds to a spate of worsening economic indicators in Hong Kong, which is in the midst of its first recession in 10 years.

Go deeperArrowNov 18, 2019