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Hong Kong and China stocks drop amid mounting Covid-19 cases, US-China friction

  • Hang Seng Index declined 0.7 per cent on Friday, ending the week almost flat
  • Shanghai Composite Index lost 0.3 per cent, but closed the week 1.4 per cent higher

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Social distancing at a restaurant in Hong Kong. Rising Covid-19 infections at home and abroad are weighing on sentiment once again. Photo: Sam Tsang
Iris Ouyang

The Hong Kong and China markets closed lower on Friday amid concerns about rising Covid-19 infections and a fresh round of sanctions by Washington on Chinese companies.

The Hang Seng Index declined 0.7 per cent to 26,498.60, ending the week almost flat. The Shanghai Composite Index lost 0.3 per cent to 3,394.90, but closed the week 1.4 per cent higher.

Infections have continued to surge at home and abroad. Hong Kong expected more than 60 cases on Friday amid concerns about a quarantine backlog. Deaths and hospitalisations touched single-day highs in the United States overnight, while Germany returned to a strict lockdown for a second time this year, after reporting 952 coronavirus deaths in 24 hours on Wednesday, a daily record. Australia faced another cluster of infections, while South Korea saw its deadliest day.
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“Virus resurgence, particularly in Europe and the US, is expected to weigh on consumption,” said Ernie Hon, head of research at Essence International Securities in Hong Kong. “Social distancing seems to continue to increase in some countries despite the roll-out of vaccines, which will affect the real economy.”

He said sluggish sentiment in the mainland China market had spread to Hong Kong, where investors were doubting the sustainability of recent rallies that followed progress on Covid-19 vaccinations and record gains on Wall Street. The Dow Jones Industrial Average, Nasdaq Composite and S&P 500 all ended with record highs overnight on Thursday.

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Washington, meanwhile, continued to apply pressure on Beijing. The Trump administration plans to add around 80 additional firms to a so-called entity list, with almost all of them Chinese, Reuters reported on Friday. The US energy secretary signed an order overnight that prohibits utility companies supplying critical defence facilities from importing certain items from China, as the country fights “against attacks and exploitation by foreign adversaries”.

Technology stocks retreated in Hong Kong, with the Hang Seng Technology Index down 1 per cent. Semiconductor giant SMIC shed 5.2 per cent, Meituan fell 2.3 per cent and Alibaba Group Holding, which owns the South China Morning Post, lost 0.9 per cent.

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