Name: SCMP
Telephone: +852-2680-8888

customContents

entityId

entityUuid

articlePageQuery

filter

article

articleBaseAdvertisingInfoArticle

articleListArticle

articleSeoArticle

helpersCheckIsPostiesArticle

hooksArticleAcknowledgementGateOverlayArticle

hooksTrackPageViewArticle

hooksContentInterestArticle

articleLinkingDataContent

articleSchemaContent

liveArticle

advertZone

sentiment

contentLock

topics

types

sections

moreOnThisArticles

urlAlias

commentCount

sponsorType

authorLocations

authors

corrections

displaySlideShow

multimediaEmbed

seriesContainer

printHeadline

socialHeadline

headline

glossary

flattenTypeIds

paywallTypes

publishedDate

additionalInfoBoxes

images

image

relatedLinks

relatedNewsletters

__typename

createdDate

sponsor

factSheets

series

summary

updatedDate

flag

knowledgeQuestion

disableOffPlatformContent

published

subHeadline

body

keywords

copyrighted

customTimezone

liveContents

Yujing Liu

Azar Zaidi

In a surprise move, US President Donald Trump said he would raise tariffs on US$200 billion worth of Chinese goods because trade negotiations with China are moving too slowly.
Markets across the world plunged on the announcement. US stock futures tumbled, with S&P 500 e-minis down 1.9 per cent in latest trading. The offshore yuan weakened as much as 1.2 per cent against the US dollar to a four-month low in morning trading.
China is considering cancelling a planned Washington trip this week by Chinese President Xi Jinping’s top trade envoy, Liu He, according to The Wall Street Journal.
The China markets are heading into the first trading day of May after a three-day public holiday to mark Labour Day.
Stay with us to check out the latest action in the China and Hong Kong markets throughout the day.
– Yujing Liu and Azar Zaidi in Hong Kong 


Stocks Blog: Trump tweets lead to biggest daily loss in China stocks in three years

Business

Markets

Donald Trump threatens to increase 10 per cent China tariffs to 25 per cent on Friday
Traders ignore better-than-expected April Caixin services PMI after surprise Trump tweet


Donald Trump threatens to increase 10 per cent China tariffs to 25 per cent on Friday.


China stock market

Stocks

Hong Kong Stock Exchange

Live

* Overnight markets/ what futures foretell
– Overnight in US markets, S&P 500 gained 1 per cent, Nasdaq rose 1.6 per cent and Dow Industrials added 0.8 per cent.
– Hong Kong futures are 1.9 per cent lower, while the China A50 futures have plunged 4.8 per cent.
* IPO debuts: none
* Economic statistics/central bank action: April Caixin composite and services purchasing managers’ indices due today at 9.45am.
* Corporate events: earnings, meetings, news conferences: nothing major
* Later this week:
Tuesday – China April foreign exchange reserve
Wednesday – China April import and export data
Thursday – China April Consumer Price Index
Friday – China April money supply and social financing data


Morning Guidance

US President Donald Trump’s threat to more than double tariffs on US$200 billion worth of Chinese imports risks weakening global economic growth, said Tai Hui, chief market strategist for Asia-Pacific at JPMorgan Asset Management. The angst has already been reflected in a tumble in the futures contracts of FTSE China A50 Index in early morning trading on Monday, he said.  Hui said the Trump Administration will probably rein in his rhetoric once the economy and stocks are hit by this latest escalation in the US-China trade war.

“This will be similar to the end of November, when the two sides were willing to call a truce and negotiate,” Hui said.

“Trump’s latest threat to raise tariffs on Chinese exports in order to pressure Beijing to make more concessions appears to reflect the administration seeking a harder line in response to domestic political pressures. This shift could be counterproductive in two ways,” Hui said. “First, Beijing could be willing to walk away if the US applies negotiation tactics that they don’t agree with. Indeed, early reports suggesting Beijing is considering cancelling the latest round of trade talks is consistent with its practice in the past 12 months. That said, both sides have invested significant time and resource to come this far and are likely to want to preserve the progress achieved in recent months.

“Second, investors have already been looking for triggers for volatility to return, after an extended period of low volatility. We continue to be constructive on the US economy, but external shocks could derail such optimism. Escalation of the trade war could be the trigger for weaker global growth. This is already being reflected in the futures market in early Asian session on Monday, albeit with reduced liquidity.”
– Zhang Shidong and Eugene Tang


Escalation of China-US trade talk risks derailing growth, JPMorgan Asset says

China and Hong Kong markets fell sharply in early trading as investors panicked over Trump’s latest tariffs threat.
The Shanghai Composite Index plunged 3 per cent to 2985.15 in latest trading. The Shenzhen Component Index was down 3.6 per cent and the Nasdaq-style ChiNext Index fell 3.9 per cent.
In Hong Kong, the Hang Seng Index dropped 2.5 per cent to 29,333.05.


Markets from Shanghai to Hong Kong enter sell-off mode

The People’s Bank of China will lower the reserve requirement ratio (RRR) for rural banks with assets less than 10 billion yuan (US$1.5 billion) to lower financing costs for smaller companies, it said in a statement today.
The RRR determines the amount of cash banks must hold as reserves. About 1,000 banks will benefit from the cut, which will release 280 billion yuan in long-term capital into the banking system, it said.
 


Central bank to cut RRR for smaller banks, injects US$42 billion in liquidity

April’s Caixin Services Purchasing Managers’ Index (PMI) came in at 54.5, rising from 54.4 in March and higher than a market consensus of 54.2, according to a Bloomberg poll. The Caixin Composite PMI was 52.7, down from 52.9 a month earlier.
The upbeat reading suggests recovering activity in the services industry, but is not helping the markets, as investors and traders rush for the exits amid a gloomy outlook for the US-China trade talks.


China April Caixin services PMI beats estimate, but not helping market

Kangmei Pharmaceutical (600518 SH), one of China’s biggest drug makers, plummeted by the daily limit of 10 per cent after the company blamed an “accounting error” for overstating its cash holdings by a staggering 30 billion yuan (US$4.5 billion).
The company, which reported the error last week, received a letter from the Shanghai Stock Exchange requiring it to clarify the details and reasons for the error, as well as other risks it may face in the future.


Drug maker Kangmei plunges after US$4.5 billion disappears from cash holdings

The Shanghai Composite Index was down 3.6 per cent at 2969.05 in latest trading, on track to its biggest daily loss since March 8. The benchmark has plunged below the psychologically important 3,000-point level, which has been a key support level for the market over the past two months.
Stocks related to the free-trade zone in Shanghai led the decline, with a gauge tracking 23 related stocks tumbling 6 per cent. Shanghai International Port Group (600018 SH), which operates the public terminals at the Shanghai port, declined by 8.6 per cent.
The Shenzhen Component Index plummeted by 4.1 per cent, while the ChiNext Index declined 4.4 per cent. In Hong Kong, the Hang Seng Index fell 2.8 per cent to 29,237.01.
Read a full report here.


China, Hong Kong markets widen losses, Shanghai below key 3,000-point level

Chinese gold producers bucked the downward spiral in the overall markets on Monday and rose as investors bet on the safe-haven asset amid the dramatic escalation in the trade war between the US and China.
Yantai Yuancheng Gold (600766 SH) jumped 5.7 per cent and Western Gold (601069 SH) rose 4.6 per cent. In Hong Kong, Zhaojin Mining (1818 HK) advanced 4.2 per cent.
The spot gold price rose 0.2 per cent in latest trading. The precious metal is considered a safe-haven asset in times of geopolitical uncertainty and economic turbulence.


 Gold producers climb as investors seek safe haven

The stock market woes in Hong Kong and mainland China spilled over to other Asia-Pacific markets, weighing on equity indexes from Seoul to Sydney. Only Kosdaq, the South Korean technology board, managed to eke out a gain amid slumps across the region. 
Singapore was the market outside China that was the worst-hit by Trump’s surprise tweet, with the Straits Times Index slumping by nearly 3.1 per cent, its biggest intraday percentage decline in a year. Declines were paced by banks and developers that have large investments in mainland China. United Overseas Bank led declines with a 6.9 per cent slump, while CapitaLand, one of the biggest foreign investors of commercial and retail property in China, fell 3 per cent.
In Hong Kong, the Hang Seng Index fell by as much as 1,005.59 points, or 3.3 per cent, to 29,075.96. The last time the benchmark fell by about that magnitude was October 11 last year, when it fell 1,067.85 points, or by 4.1 per cent.
– Eugene Tang


Singapore worst hit as stock woes spread to Asia-Pacific markets 

Chinese medicine maker Shandong Buchang Pharmaceuticals (603858 SH) declined by the daily limit of 10 per cent, on the first trading day after a scandal related to the admission of its chairman’s daughter to Stanford University last week.
The family of Zhao Yusi, daughter of Buchang chairman Zhao Tao, paid US$6.5 million to an adviser for her admission to Stanford in 2017, US media including the Los Angeles Times reported last week. The case is part of a broader US Justice Department investigation into criminal practices in US college admissions.
Zhao Tao said in a statement on the company website on Friday that funds for his daughter’s education in the US are not related to the company. Buchang’s operation and management is independent and will not be affected by his personal matters, Zhao said.


Drug maker plummets after chairman caught in Stanford bribery scandal

Chinese producers of meatless meat surged on the back of a successful listing by US vegan burger maker Beyond Meat on the Nasdaq last week.Shares in Beyond Meat, the first publicly traded veggie “meat” company, jumped more than 160 per cent in their trading debut on Thursday.
A gauge tracking 10 stocks related to fake meats listed in Shanghai and Shenzhen rose 4.9 per cent amid a plunging market. Four of these stocks climbed by the maximum 10 per cent daily limit, including Yantai Shaungta Food (002481 SZ), one of the biggest producers of pea protein in the world, and VV Food and Beverage (600300 SH), a major soy milk maker in China.
Beyond Meat and Impossible Foods, the two most prominent meatless meat producers, have found heavyweight backers in Hong Kong.
 


Stocks linked to meatless meat surge following Beyond Meat’s sizzling IPO

Foreign investors are scrambling to get out of the Chinese stock market. Total net flows out of the A-share market reached 8.2 billion yuan (US$1.2 billion) during the morning session, and look set to challenge the full-day record of 10.8 billion yuan, recorded on March 25, according to data provider Wind.
 



Outflows from China markets top US$1 billion

Lunch time read: US President Donald Trump’s tariff war is harder to win than he claimed. Studies have found the US economy is paying the costs of his tariffs. Meanwhile, China’s overtures to other trade partners suggest it won’t cut a preferential deal with the US, writes David Dodwell. 


'Trump’s tariff war is harder to win than he claimed'

The Shanghai Composite Index declined 5.2 per cent to 2918.65 by the noon break. The benchmark at one point plummeted by 175.84 points, or 5.7 per cent, its largest intraday decline since October 11, 2018.
As many as 260 stocks listed in China tumbled by the maximum 10 per cent daily limit. The Shenzhen Component Index plunged by 6.2 per cent, and the ChiNext Index was down 6.6 per cent.
In Hong Kong, the Hang Seng Index plunged by as much as 1,125.08 points, or 3.74 per cent, at one point, recording its largest intraday decline since October 11. It was down 3.3 per cent at 29,086.74 at noon.
Electronics manufactures and telecommunications companies led declines in both markets. AAC Technologies (2018 HK), which supplies acoustics and lenses to Apple, fell 7.9 per cent, while Sunny Optical (2382 HK) also dropped 6 per cent. The telecoms sector declined 7.4 per cent on the Shanghai exchange, with four stocks down by the maximum 10 per cent, according to Bloomberg.
 


A bloody morning in the China, Hong Kong stock markets

Logistics firm Huapengfei (HPF) dropped 3.2 per cent by noon on Monday to trade at 7.06 yuan in Shenzhen, after founder Zhang Jingyu sold controlling interest to the government of China’s Guangxi Zhuang autonomous region.
HPF was among the first private enterprises to be bailed out by the Shenzhen government in October amid a meltdown in pledged shares on the stock market. The company is still struggling from a liquidity crunch.
This month, it announced a net loss of 600 million yuan for 2018, swinging from a profit of 59 million yuan in 2017.
According to an announcement, Zhang and his family members will transfer 110.53 million shares, or a 23.2 per cent stake, to an investment fund owned by the government in Baise in Guangxi. Zhang will also transfer 10 per cent of total voting rights. After the deal, HPF will become a government-controlled enterprise.
Between last November and April, Zhang and his family pledged about 90 million shares for loans from a bailout fund set up by the Shenzhen government.
Before Monday’s announcement, Zhang had pledged 99.5 per cent of his shares for loans from various institutions.
– Laura He
 


Struggling Shenzhen logistics firm falls sharply following nationalisation

Beijing is unlikely to pare back economic stimulus any time soon because an ongoing recovery in the Chinese economy is still a modest one, HSBC economist Chen Jingyang said in a note today.
“Moreover, as uncertainties over the US-China trade talks have made a comeback, we believe Beijing is more likely to stay on the course of fiscal stimulus and targeted credit easing in order to counter external headwinds,” she said.
China’s better-than-expected April Caixin services PMI hints at a resilient services sector supported by a continued recovery in domestic demand, Chen said. Overall consumption “is growing at a healthy pace and shifting from goods to services”, she said.
Concerns that Beijing may cut some of its supportive policies rolled out to stimulate the economy have weighed on market sentiment over the past two weeks.


Beijing to continue targeted easing for private sector, HSBC says

China is reconsidering Liu He’s planned trip to Washington this week after US President Donald Trump threatened to increase tariffs, with either a delay or complete cancellation possible, a source who has been briefed on the latest arrangements told the South China Morning Post.
Another source said both sides remain committed to a final agreement, but Trump’s threat puts the Chinese delegation in a difficult position as any agreement could be perceived by the domestic audience as a capitulation to the White House.
Read the full story here.


China reconsidering Liu He’s US trip

China’s senior government officials have called on state funds – the so-called National Team – to prepare to intervene and stabilise its US$7 trillion stock market today if needed, Bloomberg has reported citing anonymous sources.
It was unclear whether the state funds had taken any action by the midday break, according to the report. Chinese authorities are known to frequently step into the market and help calm swings.


‘National Team’ may rescue the market, Bloomberg reports

The rout triggered by US President Donald Trump’s tweets about increasing tariffs on Chinese imports has pushed major stock indices in mainland China into correction territory. On Monday afternoon, the Shanghai Composite Index was down 12 per cent from an April high, while the CSI 300 Index of big-caps was down by 11 per cent. A decline of more than 10 per cent from a recent high means a correction is underway. China’s major indices have been the best performers globally this year, with gains topping 30 per cent.
 



Major Chinese benchmarks in correction territory

Strong buying of stock-market heavyweights was unable to stem a downward spiral on the Shanghai and Shenzhen exchanges, which ended Monday with heavy losses.
All major Chinese benchmarks tumbled. The Shanghai Composite Index plunged 5.6 per cent to 2,906.46, recording its biggest daily decline since February 25, 2016. The CSI 300, which tracks China’s largest listed companies, was down 5.8 per cent at 3,684.62. The Shenzhen Component plummeted by 7.6 per cent to 8,943.52. The Shenzhen Composite Index fell by 7.4 per cent, its lowest since June 2015.
As many as 1,124 out of the 3,700 stocks listed in China plummeted by the maximum 10 per cent limit, with only 109 stocks rising.
Trading volume stood at 658 billion yuan (US$98 billion), while total net outflows of foreign capital through the Stock Connect programme trimmed to 5.2 billion yuan from 8.2 billion yuan in the morning.


Shanghai Composite posts biggest daily decline in over three years

“Many people are taking short-term views, and very short-term views if you listen to Trump, because it could change in the next hour, or the next day,” Michael Kadoorie, the chairman of Hong Kong utility CLP Holdings, said during the company’s annual shareholders meeting on Monday. “I’m a great believer in long-term views. In the long term, I have great faith in the mainland, in [the Chinese government’s] ability to tackle the problems that come with growth. I’ll be happy to continue investing in [mainland China].”
CLP, the 14th largest stock on the 50-stock Hang Seng Index, fell by as much as 1.2 per cent in a tumbling market to an intraday low of HK$88.40.
– Eric Ng


 Happy to continue investing in China, CLP chairman says

The 5.6 per cent decline in the Shanghai Composite Index was overdone, given the outlook that a trade deal between China and the US was still likely, said Gerry Alfonso, director of the international business department at financial services company Shenwan Hongyuan Group, China's oldest brokerage, in Shanghai.
“The market did, in my opinion, overact to the trade news,” he said. “The base case scenario remains the same, with a deal being reached. In the short term, there is going to be a lot of volatility with the market overacting in both directions. Today’s reaction was particularly big, as there was a strong market consensus that a trade deal was virtually done, which is probably still the case. Assuming that there is a trade deal, and the improving situation in the real economy, that should give the equity market support in the medium to long term.”
– Zhang Shidong


Stocks markets ‘overreacted’ to twists in trade talk, Shenwan says

The Hang Seng Index declined by 2.9 per cent, or 871.73 points, to 29,209.82, its biggest one-day loss since January 2 this year.
Telecommunications companies and stocks related to 5G led the decline, as investors feared Chinese technology firms could again be targeted amid heightened geopolitical tensions between China and the US.
ZTE (0763 HK), the Chinese telecoms giant temporarily banned from buying goods from US companies last year, plunged by 9 per cent. China Tower, the state-owned operator of telecom towers, declined 4.6 per cent.


Hong Kong stocks record worst daily performance in four months

Futures for the Dow Jones Industrial Average tumbled 465 points, or 1.8 per cent, to 26,034.00 in pre-market trading. Futures for S&P 500 and the Nasdaq dropped 1.7 per cent and 2 per cent to 2,898.50 and 7,705.00, separately.
The Volatility Index, a key gauge of panic and fear in the market, spiked by 43 per cent, or 5.48 points, to 18.35, its highest level in more than three months.
– Laura He


 VIX shows rising fear, US stocks likely to open sharply lower on Monday 

Economists at Citi said they were “cautiously optimistic” about a US-China trade deal in the second quarter this year. In the meantime, the threat of further tariffs would remain a way for the US to get concessions from China and to enforce a potential trade agreement.
In a report published today, economists led by Cesar Rojas said China had become less willing to make additional concessions to the US as its domestic economy stabilises. Therefore, Trump’s surprise tariff threat is a way for him to put more pressure on China to get concessions.
The economists noted that US administrations pay attention to the stock market, and a negative reaction in US equities could make the Trump Administration retreat from implementing these tariffs.


Citi ‘cautiously optimistic’ on trade deal in second quarter  

“Even without Trump’s threats, the Hong Kong market was already showing signs of topping out,” said Ronald Wan, non-executive chairman at Partners Financial Holdings, a Hong Kong-based asset management company.
Wan said the market was struggling for new drivers as it had already priced in all the good news over the past few weeks, including China’s stabilising economy and the US Federal Reserve’s increasingly dovish stance.
Hong Kong stocks are likely to experience volatile swings until Friday, when investors are likely to hear about more progress in the trade negotiations, he said.
Telecoms and 5G stocks will be pressured in the short term because investors are worried China may be forced to make concessions to open up its domestic telecoms markets to the US, he added.


Partners Financial’s Wan says Hong Kong stocks to stay volatile 

The declines in China and Hong Kong stocks are a healthy development for long-term investors in these markets, according to American asset management company Invesco.
The sharp decline was a result of not only Trump’s tariff threats, but also investors taking opportunities to adjust their positions after profiting from a strong rally since the beginning of this year, says a note published by Invesco’s Asia equity investment team today.
“It is consistent with our view that the market will correct in the short term as it has run ahead of fundamentals due to improved liquidity and sentiments,” it said. China’s domestic policies are likely to remain supportive, which will help offset negative impact from trade tensions, it said.
“We believe the correction is a healthy development for long-term investors to position for a better end to 2019. Chinese markets (both offshore and onshore) traded at around their long-term average and we believe the valuation remains healthy,” it said.
