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Hong Kong stocks slumped on Thursday after Chinese data showed weaker than expected industrial production in October even as protestors brought the city’s business district to a grinding halt for the fourth straight day. Stocks had opened higher in what proved to be a dead cat bounce on the heels of a sharp sell-off in reaction to Wednesday’s violent protests.

The Hang Seng index fell 0.95% to 26,319.48 points to a one month low as telecoms, property and industrial sectors underperformed. The Hong Kong Interbank Offered Rate (HIBOR) shot up to four-month highs as demand for Hong Kong dollars shot up for subscribing to Alibaba’s Hong Kong listing. The e-commerce giant plans to sell 500 million shares which will raise between US$10 billion and $15 billion. The company aims to price the share at a maximum HK$188 per share, according to media reports.

Traffic disruptions and protests impacted major thoroughfares in the city with many offices asking their workers to return home early or work from home. Hong Kong’s education bureau had already announced that all schools including kindergartens would be closed on Thursday in anticipation of more unrest.

Wave of event cancellations in HK

Following the protesters’ pledge to continue dislocating the city’s infrastructure, a host of events have been canceled in Hong Kong, prompting a meeting called by Chief Executive Carrie Lam with some of her top officials.

“The middle ground – or the situation we are in right now – is not a good place because it has the worst of both worlds. If a resolution is seen favoring the protesters, there will be a lot of support from the international community and if the authorities have their way, Beijing will back the economy and markets,” said Nitin Dialdas, CIO of Mandarin Capital.

Meanwhile, the Hong Kong market fell for the second straight day with the gloom compounded by Tencent missing its earnings forecast.

“The Hong Kong market opened slightly higher this morning, and came off following the release of a weaker than expected figure for China’s October macro data – fixed assets investment has slowed growth to 5.2% lowest since 1998,” said a Hong Kong-based trader. “Also escalating local unrest and Tencent disappointing earnings both add more downward pressure on the index.”

Chipmakers gained on the news that Huawei will unveil its Kirin A1 chipset in India, which is smaller than Apple’s H1 chip, offering 30% higher performance, while consuming 50% lower power.

Retail names were under pressure after the National Bureau of Statistics announced China’s retail sales of consumer goods rose 7.2% YoY in October, falling from 7.8% YoY in September.

Ray of hope in gloomy China data

Industrial production growth moderated to 4.7% year-on-year in October from 5.8% in September and below the polled number of 5.4%. Fixed asset investment growth fell from 5.4% in September and its implied monthly growth softened to 3.7% versus 4.8% in September.

“The weaker October activity growth affirms our view that real GDP growth will likely decelerate to sub-6% in 4Q with the filtering-through of the Sept tariffs on export growth and continued weakness in consumption,” said Morgan Stanley in a note published after the data release.

“We also expect USD50-100bn local government bond front-loading in the next 1-2 months, which will focus more on infrastructure investment,” it said.

Still, there was optimism.

“The better-than-expected export performance suggests some early signs of stabilization in global growth, which could partially offset domestic weakness and help to arrest the downward growth momentum,” said Barclays in a report.

The investment bank raised China’s 2019 GDP growth forecast by 10bp to 6.1% and for 2020 by 30bp to 5.8% citing improved corporate loan offtake, interim trade deal and better home sales in October.

Open sesame or China

Meanwhile, the buzz around Alibaba’s Hong Kong listing pushed up HIBOR rates across tenors – the one-week rate rose to 3.1%, the two-week tenor to 3.34% and the one-month rate to 2.75%.

Hong Kong will remain the secondary listing for Alibaba whose IPO orderbooks opened on Wednesday and according to sources was already fully sold.

“It makes a lot of sense for Alibaba to be listed close to its natural buyer base. This will broaden out the ownership and in due course should help reduce price volatility. This is both because of proximity to its operations and the better understanding among its investor base,” said Ben Rudd, CIO at Prudential HK Ltd.

Investor demand is expected to be robust on account of the trade war as domestic investors, turning away from US markets, would prefer to buy the stock listed in Hong Kong.

“For Chinese funds there is a lot less friction when they are trying to buy shares in Hong Kong and it is logistically a lot easier,” said a source familiar with the transaction. “The investors here they know our eco system and Hong Kong is 12-13 hours ahead of the US – it makes sense to trade Alibaba here.”