Hong Kong, China stocks are dragged down by tech declines after semiconductor firm SMIC plunges on US ban threat
- The Hang Seng Index, which fell 2.9 per cent last week, declines 0.4 per cent
- Improved trade data has limited impact on markets amid doubts about China’s economic recovery, analyst says
The Hong Kong and China stock markets were dragged down by technology stocks on Monday, with top Chinese semiconductor producer SMIC falling by as much as 23 per cent after the Trump administration said last week it might blacklist the company.
A decline in technology stocks led by SMIC, the return of protests to the city’s streets over the weekend and a spillover of risk-off sentiment from Wall Street contributed to the declines.
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The markets were on Monday also closely watching whether China’s economic recovery was sustainable. Improved trade data for August released in the morning showed that the total value of exports and imports rose 6 per cent to 2.88 trillion yuan (US$421.7 billion) last month, with exports rising 11.6 per cent to 1.65 trillion yuan and imports dropping 0.5 per cent to 1.23 trillion yuan.
The data was generally in line with market expectations, said Willer Chen, an analyst at Forsyth Barr Asia in Hong Kong. “The market’s interpretation of data coming out of China is tricky,” he said, adding that stocks got only a limited boost on Monday, as there was still some doubt among investors about China’s economic recovery.
Other technology stocks affected by the latest escalation in US-China tensions included China-based Hua Hong Semiconductor, which fell 14.4 per cent, and BYD Electronic, which dropped 7.4 per cent, both in Hong Kong.
“Sentiment is relatively weak … the drop in technology stocks in the US affected the investment sentiment for such stocks in Hong Kong and China, which were further pressured by the Trump administration’s hostile actions ahead of the [US presidential] elections” in November, said Ernie Hon, head of research at Essence International Securities in Hong Kong.
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Alibaba, Xiaomi and WuXi have risen quite a bit since mid-August, following the announcement of their inclusion in the index, and its “positive impact has already been priced in”, said Forsyth Barr’s Chen, adding that new components of the index tended to fluctuate in the first 10 days after being added to the benchmark.
CK Asset Holding’s share price, on the other hand, rose 1.5 per cent after Caixin reported that it was considering selling two projects worth up to 50 billion yuan in Beijing and Shanghai to mainland developer Sunac. Hong Kong-listed Sunac dipped 0.6 per cent.
The subdued start to the week followed a tumble in technology stocks on Wall Street that last week led to the biggest two-day slide in global equities since June. Doubts about the sustainability of lofty valuations drove broad declines in Asian markets at the end of last week.
In Hong Kong, about 300 people were arrested during protests on Sunday. They were demonstrating against the government’s decision to postpone legislative elections for a year over public health concerns amid a third coronavirus wave and the national security law imposed by Beijing.
And weaker sentiment was expected through September and October, with tensions between China and the US expected to rise in the run up to the US presidential elections in November.
“More fluctuations are likely in September. After that there will be chances for a rebound, but it also depends on the progress of [a new] stimulus package in the US” aimed at relieving the affects of Covid-19, Essence International Securities’ Hon said.
