China, Hong Kong stocks slump as Trump threatens higher tariffs on US$200 billion worth of Chinese goods

The Hong Kong benchmark falls to a 10-month low, weighed down by Tencent Holdings

PUBLISHED : Thursday, 02 August, 2018, 12:53pm
UPDATED : Thursday, 02 August, 2018, 6:02pm

Hong Kong stocks slumped to a 10-month low on Thursday along with tumbling Chinese stocks,after President Donald Trump said the US was considering more than doubling the tariff rates on the proposed US$200 billion worth of Chinese goods, escalating a trade dispute between the world’s two largest economies.

The Hang Seng Index declined 2.2 per cent, or 626.18 points, to 27,714.56, falling for a fourth straight day to the lowest level since September 28. The losses came after the White House said it was assessing a plan to increase the duties to 25 per cent from 10 per cent, which can come into effect as early as next month.

In the mainland, the Shanghai Composite Index slid 2 per cent, or 56.51 points, to 2,768.02, extending a 1.8 per cent drop a day earlier. The sell-off put the benchmark of the mainland’s equities just 2 per cent shy of a 28-month low set on July 5.

“New threats from the US to increase tariffs indicate the trade dispute is worsening and broadening. This has led to more pessimistic sentiment in the financial market,” said Gordon Tsui, managing director at Hantec Pacific. “The cautious trading will last at least several months towards the end of this year.”

Traders are offloading their holdings of Chinese stocks even after Beijing has implemented counter measures to cushion a possible slowdown from its trade friction with the US. At a top leadership meeting on Tuesday, policymakers pledged to spend more on infrastructure projects, fine-tune monetary policies and ease off on financial deleveraging.

The cautious trading will last at least several months towards the end of this year
Gordon Tsui, Hantec Pacific

“It’s a loss of confidence among investors, who are worried that all the measures rolled out by the Chinese government aren’t enough to offset the impact of the trade war,” said Wu Kan, a fund manager at Shanshan Finance in Shanghai.

The Hang Seng Index and the Shanghai Composite Index have both dropped 3.5 per cent this week.

In Hong Kong, benchmark heavyweight Tencent Holdings slid 2.8 per cent to HK$345, contributing to 76 points of decline in the Hang Seng Index. The drop came amid a downward trend in technology shares globally, ahead of the firm’s half-year earnings release on August 15 and analysts’ concerns about the prospect of its gaming business. Shares of the internet giant have fallen 26 per cent from their height in March.

Chinese smartphone maker Xiaomi fell 3.4 per cent to HK$17.26, erasing gains from the past month and finishing just above the price of HK$17 it set for its initial public offering on July 9.

Macau casino shares also tumbled. Wynn Macau fell nearly 10 per cent to HK$20.75, after reporting on Wednesday an 18.1 per cent decline in casino revenues for the second quarter from the same period last year. Sands China dropped 3.8 per cent to HK$38.30, and Galaxy Entertainment Group was down 5.3 per cent to HK$58.85.

In the mainland, consumer stocks led the losses on concern that slowing growth will hurt consumer spending. Kweichow Moutai, China’s biggest liquor distiller, dropped 2.7 per cent to 695.84 yuan even after posting a 40 per cent increase in first-half profit.

Property developers extended their decline from Wednesday after China’s top leadership stressed to rein in home prices.

China Vanke fell 4.3 per cent to 21.38 yuan. Bright Real Estate Group lost 5.4 per cent, and China Merchants Shekou Industrial Zone Holdings sank 4 per cent.

Further Reading: Bears and short-sellers dare not wade into China’s equity slump for fear of regulator’s wrath