TAIPEI (TheStreet) -- Weekend clashes between thousands of pro-democracy protesters and tear gas-spraying police in Hong Kong threaten high-end retailers, the stock market and subsidiaries of a number of American companies on Monday.
A disruptive long-term occupation of the Asian financial hub's Central district or a series of violent incidents could cut deeper into the Hong Kong economy as tourists stay away and investors shift their holdings elsewhere. Hong Kong's Hang Seng stock exchange sagged about 2% by late Monday, what one economist called a "chunky" drop that was out of line with other Asian markets.
U.S. stock markets also fell, reacting to the instability in the region.
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"If it gets bad, like Thai-style turmoil, that would spread more broadly," says Tim Condon, a research head with ING Financial Markets in Singapore, referring to last May's mass unrest in Thailand. "People don't want to be exposed to a place where there's blood in the streets. Markets can handle risk, but not uncertainty."
Protesters plan to strengthen their hold in the days ahead. "Hong Kong's stability is very important for Asia," says Raymond Wu, managing director with Taipei-based risk consultancy e-telligence. "It's a regional financial hub, if not more. It will, of course, have an impact if the confrontation persists."