China’s retaliation against US tariffs hits global financial markets
Hong Kong stocks closed below 30,000 points; yuan declined sharply against the US dollar
China’s retaliation against the US’ latest round of tariffs by slapping additional duties on US$50 billion worth of US imports has sent global markets jittering, with the US market expected to open its next session sharply lower.
Hong Kong stocks plunged in Wednesday’s late trading, closing below the 30,000 mark for the first time in a month, after China announced in the late afternoon of new tariffs on 106 types of US imports that include soybeans and automobiles.
It came less than 11 hours after the US issued a tariff list targeting more than 1,300 Chinese imported goods in the industrial and technology sectors.
The Hang Seng Index tumbled in the final hours of trading, after seesawing between small gains and losses in the morning. By close, it was down 2.2 per cent, or 661.41 points, to 29,518.69.
The Hang Seng China Enterprises Index, which tracks Hong Kong-listed Chinese companies, was off 2.3 per cent, or 279.26 points, to 11,857.41.
Turnover on the main board decreased slightly to HK$109 billion (US$13.88 billion) from Tuesday.
China’s move also sent European stocks lower, with Germany’s Dax falling 1.7 per cent to 11,803.69 in morning trade, while the UK’s FTSE 100 index dropped 0.8 per cent to 6,977.18.
Futures for the Dow Jones Industrial Average, the S&P 500, and the Nasdaq all fell significantly following Beijing’s announcement, indicating a lower open to be expected for early Wednesday stock market trading. The Dow, S&P and Nasdaq futures briefly dropped by around 2 per cent ahead of the US market open.
“Investors were jittery over trade war fears, as the tensions between the US and China are heating up,” said Louis Wong, a fund manager for Hong Kong-based Phillip Securities.
“Risks for trade protectionism have not been priced in the market yet. I think stocks will test new lows after the [tomb-sweeping or Ching Ming festival] holidays,” he added.
Hong Kong and mainland markets will be closed on Thursday, with the former resuming trading on Friday and China next Monday.
Wong said from a technological analysis point of view, the Hang Seng Index had already breached the 100-day moving average. He expected the index to head lower and test the 29,000 mark when trading resumes after the holiday, should trade tensions show no signs of easing.
In Hong Kong, investors sold off tech stocks.
Chinese internet giant Tencent recorded heavy losses, as it dropped 2.9 per cent to close at HK$397.60.
AAC Technologies, a supplier of acoustic components for Apple’s iPhones, sank 5.9 per cent to HK$134.60. Sunny Optical Technology, China’s largest manufacturer of smartphone camera modules and lenses, fell 4 per cent to HK$138.10.
BYD Electronic, which makes handset components and assembles smartphones, fell 9.1 per cent to HK$12.98. Software developer Chinasoft International lost 6.6 per cent to HK$6.71.
On the currency front, the Chinese yuan weakened sharply against the US dollar following Beijing’s announcement. The US dollar bought 6.3067 yuan in the offshore market in Hong Kong in evening trade, strengthening by 0.5 per cent from the previous close. In the Shanghai onshore market, the US dollar traded at 6.3069 yuan, representing a 0.3-per cent gain.
The Japanese yen and gold prices both surged, as investors sought shelter in traditional safe-haven assets. The US dollar fell 0.5 per cent to 106.13 Japanese yen. Gold futures rose 0.8 per cent to trade at US$1,347.40 per ounce.
In mainland China, where the stock market closed before Beijing’s announcement of tariffs, the Shanghai Composite Index ended the day slightly lower, down 0.2 per cent to 3,131.11. It posted its third straight day of losses. The start-up board index ChiNext skidded 1.9 per cent to close at 1,836.81.