China stock market

Hong Kong and China stocks fall after Trump’s plans for foreign metals tariffs fuel trade war fears

US plans to impose 25pc tariff on imports of steel and 10pc on aluminium, fuelling speculation that global manufacturers will be hit and draw retaliation

PUBLISHED : Friday, 02 March, 2018, 9:10am
UPDATED : Friday, 23 March, 2018, 12:05pm

Hong Kong and mainland stocks ended Friday lower, led by metals producers after US President Donald Trump’s decision to levy tariffs on imported metals triggered concerns over a global trade war.

The Hang Seng Index slid 1.48 per cent, or 460.80 points, to 30,563.45, meaning a weekly loss of 2.2 per cent. The mainland’s Shanghai Composite Index shed 0.59 per cent to 3,254.53. Benchmarks in Japan and South Korea slid 1 per cent and 2.50 per cent respectively.

Trump on Thursday announced the US plans to impose 25 per cent tariffs on imports of steel and 10 per cent on aluminium, fuelling fears that manufacturers across the world would be hurt and draw global retaliation.

The US president is expected to sign a formal order next week, but has not elaborated on the details of his planned action.

The announcement comes at a crucial juncture when China’s top economic adviser, Liu He, is in Washington and holding meetings with White House officials.

“We haven’t reached a stage of an all-out trade war globally, but investors are now beginning to price in that kind of risk,” said Ken Chen, a strategist at KGI Securities in Shanghai.

“Should that happen, that will be a serious setback for globalisation and global growth. Hong Kong stocks are now more subject to increased volatility from the outside and the downside pressure is still there.”

Trump’s planned tariffs appear to be harsher and are likely to be put in place for longer than the last US steel tariff episode in 2002-2003, under President George W. Bush, analysts said.

Across-the-board tariffs imposed on all imports of aluminium and steel are expected by Trump, while the Bush plans had exemptions, United Overseas Bank said in a research note.

Moody’s Investors Service said, however, said that the US’ planned tariffs on steel imports was credit negative for Asian steel producers, and the impact would not prove to be material.

For example, China’s direct steel exports to the US represented just 1 per cent of total exports during the first nine months of 2017, indicating that the impact of the tariff would probably be manageable given US exports account for only small portions of China’s steel production, Moody’s said.

Speculation on a global trade war is adding to worries that the Federal Reserve will speed up the pace of raising interest rates, and triggering volatility in global stocks.

The Hang Seng Index, for instance, remains down 7.8 per cent from an all-time high set on January 26.

Mainland investors – major buyers of the city’s stocks since an Stock Connect exchange links started between Hong Kong and Shanghai and Shenzhen – were net sellers for two consecutive days this week.

The Hang Seng China Enterprises Index, or the H-share gauge, sank 1.81 per cent on Friday.

Friday’s decline was broad-based, with the all four industry groups on the Hang Seng Index under pressure. Financial companies contributed to the biggest drop on the benchmark.

AIA Group lost 1.83 per cent to HK$64.40 and China Construction Bank shed 2.68 per cent to HK$8. Bank of China fell 0.94 per cent to HK$4.20.

AAC Technologies Holdings, an Apple supplier, fell 1.11 per cent to HK$151.80 in Hong Kong after China International Capital said earnings growth for Chinese smartphone suppliers may slow as the latest models from Apple and Samsung had failed to excite. Sunny Optical Technology Group dropped 2.65 per cent to HK$128.70.

In the mainland, the CSI 300 Index of large companies lost 0.81 per cent while the ChiNext gauge of small-caps declined 1.0 per cent.

Among the biggest decliners, Nanjing Iron & Steel slumped 6.26 per cent to 5.24 yuan and Baoshan Iron & Steel fell 3.90 per cent to 9.61 yuan. Aluminum Corp of China lost 2.02 per cent to 5.34 yuan and Shandong Nanshan Aluminum shed 1.46 per cent to 3.38 yuan.