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Hong Kong Stock Exchange

85pc of China stocks fall as Trump’s surprise swerve on US tariffs spooks investors

Shanghai Composite Index falls 2.5pc, shares in Hong Kong drop 1.4pc per cent, joining a global equity sell-off, as the political turmoil in Italy also ruffled global markets. Hang Seng briefly falls below 30,000 in morning trade

PUBLISHED : Wednesday, 30 May, 2018, 11:14am
UPDATED : Wednesday, 30 May, 2018, 10:50pm

Nearly 3,000 stocks, or 85 per cent of the total pool, fell in price on Wednesday on China’s A-share market, with telecoms and internet sectors sinking the lowest, after Washington caught Beijing off guard and announced it will proceed to impose tariffs on US$50 billion worth of Chinese exports, spooking investors in the world’s second largest equity market.

More than 180 A-share market stocks sank by the daily maximum 10 per cent limit.

Hong Kong stocks also tumbled 1.4 per cent, joining a global equity sell-off, as the political turmoil in Italy also rippled through global markets and sparked an investor flight from riskier assets.

Mainland China’s Shanghai Composite Index fell 2.5 per cent, or 79.02 points, to end Wednesday at 3,041.44 – the biggest daily percentage decline in around two months. It was also the worst closing level it has seen since October 2016.

The Shenzhen Composite Index slid 2.8 per cent to 1,736.34, and the start-up board index ChiNext Price lost 2.7 per cent.

In Hong Kong, the Hang Seng Index finished down 1.4 per cent at 30,056.79, briefly slipping below the key 30,000 level in morning trade, while the Hang Seng China Enterprises Index fell 1.6 per cent to 11,769.16. Internet conglomerate Tencent Holdings declined 1.7 per cent to HK$395.00, weighing heavily on the market.

“The surprise news from the White House [on trade tariffs] sparked worries that tensions will escalate between Beijing and Washington,” said Sam Chi-yung, a senior strategist for South China Financial Holdings.

If the index continues falling and breaches below the supporting level of 29,850 in coming days, the selling pressure could become even worse, added Curtis Tse, head of research at Hong Kong based broker Sino Rich Securities.

The surprise news from the White House [on trade tariffs] sparked worries that tensions will escalate between Beijing and Washington
Sam Chi-yung, a senior strategist for South China Financial Holdings

A support level is the price level below which a stock has had difficulty falling historically. If the price of stocks falls toward the support level, it is viewed as a testing time for a market.

The White House announced on Tuesday it will go ahead with plans to impose a 25 per cent tariff on US$50 billion worth of Chinese exports involving “industrially significant technology”.

The move surprised many as Washington and Beijing had both said weeks earlier they would put their escalating trade dispute on hold while teams worked on details to ease tensions.

The US will also move ahead with future plans to impose restrictions on Chinese acquisitions of US technology, according to the White House announcement.

On the A-share market, electronics manufacturer Zhejiang East Crystal Electronics, rival Shenzhen Rapoo Technology, and software developer GuoChuang Software all dived by their allowed 10 per cent daily limit.

Telecom equipment maker Sichuan Huiyuan Optical Communications closed the same 10 per cent lower, while telecom service provider Wangsu Science & Technology, and Dr. Peng Telecom and Media Group shed 5.6 per cent and 3.6 per cent respectively.

The deepening political turmoil in Italy also unnerved investors, triggering a bond and equity sell-off in the country which rippled through global markets, Sam said, as the caretaker prime minister ended talks on forming a government without unveiling his cabinet line-up, following the collapse of a populist coalition’s bid to govern.

Italy might have to return to the polls as early as July after Carlo Cottarelli failed to secure support from major political parties for even a stopgap government as markets tumbled on the growing political uncertainty, and that might also become a de facto referendum on the country’s euro membership.

Markets in Asia-Pacific also posted heavy losses on Wednesday reacting mainly to Italian political crisis. Japan’s Nikkei Average retreated 1.5 per cent, South Korea’s Kospi fell 2 per cent, Taiwan’s Taiex fell 1.3 per cent, and Australia’s S&P/ASX 200 was down 0.5 per cent.

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