China, Hong Kong shares tumble amid growing worries about US-China relations after arrest of Huawei CFO Sabrina Meng Wanzhou
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Stock benchmarks in the two markets closed down, with the Shanghai Composite Index falling 1.68 per cent and the Hang Seng Index dropping 2.47 per cent. Shennan Circuits and Chinasoft International, both major suppliers to Huawei, were hammered in the mainland and Hong Kong markets, falling 9.66 per cent and 11.71 per cent respectively.
Just days after China and the US reached a 90-day truce on the trade front, Huawei CFO Sabrina Meng Wanzhou was detained on December 1 by Canadian authorities at the request of the American government. The US is requesting her extradition. Meng – the daughter of Huawei founder Ren Zhengfei, one of China’s leading businessmen, an ex-People’s Liberation Army officer and an elected member of the 12th National Congress of the Communist Party of China – was arrested because she allegedly attempted to evade a trade embargo placed by the US on Iran, The Globe and Mail reported, citing a Canadian source.
The detention has cast a shadow over the 90-day trade negotiations between China and the US and rekindled concerns among investors about additional measures the White House may seek to contain China’s technology sector, particularly the fifth generation wireless networks. Earlier, Huawei’s main rival ZTE was almost put out of business and lost more than 70 per cent of its market value after the Chinese company was banned from buying key American technologies for violating US sanctions against Iran and North Korea.
“There probably will be more such conflicts and clashes over the China-US trade negotiation and that sets the stage for more volatility in the market,” said Wu Kan, an investment manager at Soochow Securities in Shanghai. “The US has a clear intention of containing China’s development and China’s technology industry will bear the brunt.”
The Shanghai Composite fell 44.62 points to 2,605.18. The gauge slid below its 60-day moving average on Thursday after three times earlier in the year briefly climbing above the key technical resistance before returning to the downward track.
