Trump tariff threat sparks selloff in Hong Kong and China

HONG KONG (Nikkei Markets) — Hong Kong and mainland Chinese language markets logged this yr’s worst day on Monday after U.S. President Donald Trump threatened to boost tariffs on Chinese language items.

Trump on Sunday mentioned on Twitter that he plans to boost tariffs on $200 billion of Chinese language imports to 25% from 10% on Friday. He threatened to impose a 25% levy on a further $325 billion in Chinese language items.

The tweets got here at the same time as the 2 nations have been engaged in a number of rounds of negotiations in latest weeks to resolve variations.

The market was caught abruptly, mentioned Eddie Tam, chief funding officer at Central Asset Investments. “One factor Trump can not ignore is that they have to make use of the China situation as a chip for U.S. presidential elections” in 2020.

A spokesperson at China’s Ministry of International Affairs on Monday mentioned a Chinese language staff was getting ready to go to the U.S. for additional negotiations, including that Washington’s threats on tariff hikes have occurred “many occasions.”

The Wall Road Journal had earlier Monday cited an individual briefed with the matter as saying that China is contemplating canceling a spherical of commerce talks set to start in Washington on Wednesday. Bloomberg had reported that China was contemplating delaying the journey.

The Hold Seng Index fell 2.9% to 29,209.82 on Monday, its worst single-day efficiency since October 2018.

Heavyweights Tencent Holdings and Ping An Insurance coverage declined three.2% and four.eight%, respectively. Pork producer WH Group, which has important pursuits within the U.S., fell 6.eight%, and was among the many prime share losers on the 50-stock gauge.

Turnover on the Hong Kong Inventory Change’s major board was at 137.25 billion Hong Kong ($17.49 billion) on Monday, larger than common, and considerably greater than what it was when China was closed final week.

Within the mainland, the Shanghai Composite Index slid 5.6% as buyers returned after a three-day market vacation. China’s blue-chip CSI 300 index tumbled 5.eight%. The yuan traded onshore misplaced zero.5% in opposition to the U.S. greenback to six.7657.

In the meantime, the Folks’s Financial institution of China on Monday introduced a discount in the amount of money that county-level lenders should maintain as reserves. The reserve requirement ratio for these banks will stand lowered to eight% from 11.5%, efficient Could 15. About 1,000 rural industrial banks can be topic to the change, the central financial institution mentioned.

Markets in the remainder of the area additionally traded decrease, with Taiwan’s Taiex shedding 1.eight% and Singapore’s Straits Instances Index dropping three%. The Nikkei Asia300 Index declined 2.2%.

In the meantime, the Japanese yen, thought-about a safe-haven asset, climbed zero.four% in opposition to the dollar, whereas spot gold costs rose zero.three%. U.S. fairness futures pointed to a decrease opening on Wall Road. S&P 500 futures had been final down 1.7%.

“Within the close to time period, buyers are rightfully nervous,” Tai Hui, chief market strategist for Asia Pacific at J.P. Morgan Asset Administration, wrote in a notice. “Nevertheless, within the longer run, given President Trump’s relentless deal with the financial system and fairness market efficiency, a market pull again could stress him to rein in his rhetoric.”

In Hong Kong on Monday, Chinese language airways, which bear gasoline and plane acquisition prices in U.S. , slid because the yuan tumbled. Air China misplaced 10.2%, China Jap Airways declined eight.2% and China Southern Airways slid 10.three%.

Gold miner Zhaojin Mining Business climbed 5.2% as spot gold costs rose.

Handset maker FIH Cell, a unit of Taiwan-listed Hon Hai Precision Business, or Foxconn, tumbled 11% after saying it expects to report a loss for the primary quarter and turnover for the interval may have fallen four.6% from a yr in the past.

Chipmakers listed in Hong Kong fell amid worries over the fallout from renewed commerce tensions, with ASM Pacific Expertise declining eight.6% and Semiconductor Manufacturing Worldwide sliding 7.9%.

Fred Wong, chief funding officer at eFusion Capital, mentioned that whereas he was unsure if Trump’s menace was only a “tactic or a closing determination,” he was inclined to imagine a full commerce settlement was “not simple,” provided that China could lead the worldwide growth of the ecosystem for fifth-generation telecommunications networks, or 5G.

Sunac China Holdings declined four.6%. The property developer on Sunday reported an 11% improve in April contracted gross sales, slowing from March’s 22% tempo of development and an 84% year-over-year bounce in April 2018 gross sales.

–Amy Lam

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