Updated 3:15 p.m. ET

(Bloomberg) -- Hong Kong was preparing to shutter businesses as Typhoon Hato drew closer to the city, with Cathay Pacific Airways Ltd. canceling flights and officials warning they may raise the third-highest storm signal.

Continues to intensify

The tropical cyclone has continued to intensify in the past few hours and may pass within 100 kilometers (62 miles) south of the global financial center, posing a threat to the city, the Hong Kong Observatory said. A Strong Wind Signal No. 3 could be upgraded to the No. 8 Gale or Storm Signal at 6 a.m. local time. Hato, named after the Japanese word for pigeon, was estimated to be about 366 kilometers east-southeast of the city and forecast to move toward the coast of Guangdong, according to the U.S. Navy and Air Force’s Joint Typhoon Warning Center in Hawaii.

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Cathay Pacific said a majority of flights to and from Hong Kong between 6 a.m. and 5 p.m. on Wednesday are cancelled. Most businesses are closed and much of the city’s public transport will start to shut down after the No. 8 signal is hoisted.

Major business interruption

The storm may also stop trading in the world’s fourth-largest equity market. Hong Kong Exchanges & Clearing Ltd. will cancel pre-market trading if the No. 8 signal is in force between 7 a.m. and 9 a.m., according to its trading rules. The morning session will be scrapped if the warning is still in effect at 9 a.m. and trading will be closed for the day if not lifted by noon. The last time the city had to scrap full-day trading was in October 2016, when Typhoon Haima prompted schools to close and airlines to suspend flights.

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On its current track, Hato’s strongest side would strike the Hong Kong area as the storm comes ashore just south of the city, said Bob Henson, a meteorologist with Weather Underground in Boulder, Colorado. In the northern hemisphere, the most powerful part of a westward moving storm is its north side.

Because Hato is moving about 24 kph, damage from heavy rains will probably be kept to a minimum, Henson said. 

“The chance for bad weather is high; the chance for catastrophic weather isn’t very high,” Henson said.

The observatory warned that weather in Hong Kong is deteriorating gradually and there will be heavy squally showers. There may be serious flooding in some low-lying areas as the storm coincides with a high tide on Wednesday morning. A storm surge is forecast to be about 1 meter.

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