China stock market

Hong Kong stocks fall for first time in five days on fear of US tariffs on China tech sector

Tech and telecom stocks in Hong Kong and the mainland post heavy losses

PUBLISHED : Wednesday, 14 March, 2018, 9:15am
UPDATED : Friday, 23 March, 2018, 12:03pm

Hong Kong’s benchmark stock index closed lower on Wednesday for the first time in five days, with electronics component suppliers posting heavy losses, in response to a report that US President Donald Trump is likely to impose tariffs on up to US$60 billion of Chinese imports in the tech and telecom sectors.

Political concerns also weighed on investors’ sentiment, following the surprise sacking of the US Secretary of State Rex Tillerson.

The Hang Seng Index retreated 0.5 per cent, or 166.44 points, to close at 31,435.01, after booking a 4.7 per cent gain in the previous four sessions.

The Hang Seng China Enterprises Index, or the H-shares index, lost 0.5 per cent to 12,684.52.

Turnover on the main board decreased about 6 per cent to HK$103 billion.

Hang Seng constituents AAC Technologies and Sunny Optical Technology, both of which supply components to Apple’s iPhones, slid 2.8 per cent and 2.2 per cent to HK$155.40 and HK$143.30 respectively. Foxconn Interconnect Technology, a unit of Apple supplier Foxconn, also dropped 0.5 per cent to HK$4.47.

Losses came after a Reuters report said early Wednesday that President Trump was seeking to impose tariffs, associated with a “Section 301” intellectual property investigations, on Chinese imports in information technology, consumer electronics and telecoms.

“Recent US trade actions and political development point to an increasingly hawkish US trade policy stance, particularly regarding China,” said UBS analysts in a research note on Wednesday.

Chinese electronics and tech exports account for 43 per cent of total exports to US and have lower domestic value-added content than other exports.

“The macro impact on China will be limited, but it is a worrying signal for more trade actions to come,” they added.

The US political uncertainty has also put traders in a more risk-averse mode, after Trump suddenly tweeted he had fired Tillerson, who will be replaced by CIA Director Mike Pompeo. It came less than a week after Trump’s economic adviser Gary Cohn resigned from the White House.

“Markets have quickly moved on from worrying about an inflation scare to focusing on continued political uncertainty in the US,” said Tai Hui, chief market strategist for Asia-Pacific at JPMorgan Asset Management in Hong Kong. “Investment sentiment can shift quickly.”

Markets have quickly moved on from worrying about an inflation scare to focusing on continued political uncertainty in the US
Tai Hui, JPMorgan Asset Management

Among other market movers, Chinese real estate developer Country Garden Holdings advanced 1.2 per cent to HK$15.14, after Morgan Stanley raised its target price for the stock to HK$19 on an estimated 40 per cent increase in net profit for last year. The company is set to release full-year results on March 20.

In the mainland, stocks closed lower after the top securities regulator slapped its largest ever fine of 5.5 billion yuan for stock manipulation on Xiamen Beibadao Group for stock manipulation.

The Shanghai Composite Index lost 0.6 per cent, or 18.86 points, to end at 3,291.38. The CSI 300 Index of big-caps fell 0.4 per cent to 4,073.34. The ChiNext measure of smaller companies shed 1.7 per cent to 1,841.29. The Shenzhen Composite Index finished 0.9 per cent lower at 1,878.51.

Tech shares pulled back sharply following recent gains. 360 Security Technology sank 7.5 per cent to 49.86 yuan. Online entertainment service provider Baofeng Group erased 6.1 per cent to 27.67 yuan. Sichuan Xunyou Network Technology gave up 4.2 per cent to 42.25 yuan.

Elsewhere in the region, the Nikkei 225 Stock Average lost 0.9 per cent to 21,777.29, and South Korea’s Kospi was off 0.3 per cent to 2,486.08.