Hong Kong stocks fall most in two weeks as US expands China blacklist, Covid-19 crisis deepens

Hang Seng Index drops amid US-China trade spat and worsening Covid-19 situation in Asia and Europe

Telecommunications companies lead losses even as local benchmark is headed for its best quarter since late 2009

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US-China trade frictions and lingering Covid-19 fallout put sentiment in check in an otherwise bullish quarter for global stock market. Photo: SCMP

Published: 11:21am, 21 Dec 2020Updated: 5:51pm, 21 Dec 2020

Hong Kong stocks fell by the most in two weeks as frictions between the US and China escalated with more Chinese companies put on a trade blacklist and the coronavirus pandemic worsened in Europe.

The Hang Seng Index slipped 0.7 per cent to 26,306.68, trimming the advance this quarter to 12.1 per cent. Benchmarks in the UK fell by more than 1 per cent while stocks in Europe retreated by 2 per cent in early trading and futures on US equities signalled losses in cash markets.

Telecommunications firms led losses in Hong Kong. China Mobile shed 2.9 per cent and China Unicom fell 2.4 per cent, while chip maker Semiconductor Manufacturing International Corp (SMIC) declined 2.9 per cent in Hong Kong and 1.2 per cent in Shanghai.

President Donald Trump signed into law on Friday the Holding Foreign Companies Accountable Act, which empowers regulators to remove Chinese companies from US stock exchanges if they fail to comply with auditing oversight rules within three years.

The Trump administration also added 60 Chinese companies, including SMIC and closely held drone manufacturer SZ DJI Technology, to the Department of Commerce’s so-called entity list. Beijing has condemned the US move and threatened to impose countermeasures.

“We believe the ultimate impact on Chinese companies will depend on the US implementation,” Jefferies analysts wrote in a December 20 report to clients. “It seems the SMIC ban is targeted and thus the impact will be limited.” The Biden administration is unlikely to be more restrictive than existing actions, it added.