Hong Kong and China shares drop as Trump Administration gets ‘even tougher on China’

PUBLISHED : Monday, 15 October, 2018, 6:15pm
UPDATED : Monday, 15 October, 2018, 10:52pm

Stocks listed in Hong Kong and China dropped on Monday, on worries the Trump Administration was stepping up its hardline approach to Beijing, which in turn sent markets lower across Asia.

On the mainland, the benchmark Shanghai Composite Index was down by 1.5 per cent, or 38.81 points, to 2,568.10. The CSI 300, which tracks the large caps listed in Shanghai and Shenzhen, dropped by 1.4 per cent, or 44.28 points, to 3,126.45.

The Shenzhen Composite Index lost 1.2 per cent, or 15.28 points, to 1,281.08, while the Nasdaq style ChiNext dropped by 1.4 per cent, or 18.19 points, to 1,250.22.

In Hong Kong, the benchmark Hang Seng Index fell back 1.4 per cent, or 356.43 points, at 25,445.06 on Monday, following a rebound of 2.1 per cent on Friday. The Hang Seng China Enterprises Index dropped by 1.5 per cent, or 154.75 points, to 10,144.34.

On Friday, US national security adviser John Bolton said Washington would further intensify its tough approach to China, and said President Donald Trump believed Beijing had “taken advantage of the international order for far too long and not enough Americans had stood up to it”.

Steven Mnuchin, the US treasury secretary, said currency issues also needed to be a central part of any solution to the US-China trade war, and kept up the pressure on Beijing to speed up its economic reforms. The US treasury is due to release a key report on what it refers to as currency manipulation this week.

“Trump seems to be getting even tougher on China, with the trade war likely to hurt Chinese exports further,” said Stanley Chan, director of research at Emperor Securities. “This is making Chinese and Asian markets very jittery and investors continue to take profits.”

People don’t expect any impact from China’s tax cuts or stimulative measures
Stanley Chan, director of research, Emperor Securities

Yi Gang, governor of the People’s Bank of China, the country’s central bank, said over the weekend he still saw plenty of room for adjustment in interest rates and the reserve requirement ratio, as downside risks from the trade war with the United States remained significant.

His comments come ahead of the release of China’s gross domestic product growth data for the third quarter on Friday; it is expected to drop to 6.6 per cent from a year ago, and from 6.7 per cent expansion in the second quarter, according to a median forecast by economists polled by Bloomberg.

“People don’t expect any impact from China’s tax cuts or stimulative measures, at least for now. Any measures to open up its markets will improve the economy in the long term only,” said Chan.

Samuel Tse, economist at DBS Bank, said: “The potential repercussions from the US-China trade war on the stock market warrant attention. The negative wealth effect to the local spending sentiment might blow headwinds to the retail sector, as well as the labour market.”

Chinese technology related companies and financials led the declines. Internet giant Tencent Holdings shed 1.9 per cent to HK$282.80 and Apple supplier AAC Technologies Holdings tumbled by 7.6 per cent to HK$66.50, while Meituan Dianping, the on-demand food delivery company, lost 6.5 per cent to HK$55.45.

Property developer Sunac China Holdings dropped by 8 per cent to HK$20.20, China Evergrande Group was 6 per cent lower at HK$19.2 and China Overseas land & Investment was down by 2.2 per cent to HK$22.70.

Ping An Insurance (Group) lost 0.6 per cent to HK$73.25 and China Construction Bank tumbled by 2.3 per cent to HK$6.07.

Wisdom Sports Group, however, bucked the trend and surged by 6.8 per cent to HK$0.63, after announcing a strategic cooperation agreement with Qinhuangdao Training Centre to promote football training and tournaments. Qinhuangdao Training has been approved by China’s General Administration of Sport and is managed by the Chinese Football Association.

Elsewhere in Asia, Tokyo’s Nikkei 225 dropped by 1.9 per cent, or 423.36 points, to 22,271.30, South Korea’s Kospi was down by 0.8 per cent to 16.73 and Sydney’s All Ordinaries lost 1 per cent to 5,948.