Asian markets hit by trade uncertainty, Hong Kong flares up again

by AFP/ pic by BLOOMBERG

HONG KONG – Asian markets sank on Wednesday after Donald Trump failed to give investors enough reassurance over the progress of China trade talks and as violent Hong Kong protests show no sign of letting up.

In a much-anticipated speech on Tuesday, the president went into election mode, hailing a strong economy and saying a trade deal was close but also warning that he could ramp up tariffs if he did not get his way.

Global equities have been on a roll for weeks on optimism the economic superpowers will hammer out a mini deal as the first part of a wider agreement.

However, with a planned signing ceremony between Trump and Xi Jinping seemingly put back to December from this month, and scant news on developments of late, traders are becoming nervous.

“We’re close. A significant phase one trade deal with China could happen, it could happen soon,” Trump said at the Economic Club of New York.

But he then warned: “If we don’t make a deal, we’re going to substantially raise those tariffs”. He added “that’s going to be true for other countries that mistreat us too”.

The remarks were seen as a big letdown for markets, which had hoped he would provide some updates on the trade talks, after being jolted by Trump’s denial of China’s claim last week that the two had a plan to remove some tariffs as negotiations progress.

“The president avoided commenting on whether a rollback in tariffs is part of a phase one deal, merely saying that he will only agree to what is beneficial for US businesses,” said Stephen Innes at AxiTrader.

“At this point, the market may have to wait until the actual signing of a deal (or not) to get confirmation on tariff rollbacks. And while the markets are still in the demilitarised trade war zone, investors remain in tariff rollback limbo.”

Tokyo and Seoul each ended 0.9 percent lower, Shanghai shed 0.3 percent and Sydney fell 0.8 percent.

Singapore was off 0.8 percent and Manila retreated more than one percent, while Wellington, Mumbai Taipei and Jakarta were also down.

Hong Kong’s night of rage

Also darkening the mood was concern about fresh unrest in Hong Kong after the city suffered a night of rage as months of protests enter a more violent phase.

Police on Tuesday warned that the rule of law in the territory was on “the brink of total collapse”.

Businesses were braced for another day of chaos, with the transport system partially closed and businesses shuttering and sporadic fighting breaking out.

Hong Kong’s Hang Seng Index plunged more than two percent, having dived a similar amount on Monday, with a small rebound Tuesday.

Bloomberg News said speculation on trading floors that Alibaba’s plans for a $15 billion share sale in the city – which reports said Wednesday were approved by regulators – could be affected by the unrest. The firm had already called off a summer listing owing to the protests and the China-US trade war.

Regionally, there are worries that the increasingly violent demonstrations could lead China to step in.

“The situation in Hong Kong has taken a decidedly dark turn this week, with the violence and economic disruption seemingly gathering pace,” said OANDA senior market analyst Jeffrey Halley, adding that nervousness about Hong Kong was weighing on other Asian markets.

“The worries about direct intervention by Beijing and its implications for the region, has ratcheted materially higher.”

Property and real estate firms were among the biggest losers, with Swire Properties, Sino Land and Henderson Land shedding more than three percent while New World Development crumbled nearly six percent.

Casino operators also fell sharply, while Hong Kong Exchanges and Clearing was off 2.8 percent as trading volumes tumble.

On currency markets, the trade talks uncertainty weighed on the yuan, which was hovering around 7.02 per dollar, having dropped below the seven mark earlier this month for the first time since early August.

And the New Zealand dollar rallied more than one percent after the country’s central bank held off cutting interest rates, confounding expectations, as it said it saw signs of life in the economy.

Key figures around 0720 GMT

  • Tokyo – Nikkei 225: DOWN 0.9 percent at 23,319.87 (close)
  • Hong Kong – Hang Seng: DOWN 2.1 percent at 26,510.42
  • Shanghai – Composite: DOWN 0.3 percent at 2,905.24 (close)
  • Pound/dollar: UP at $1.2856 from $1.2852 at 2100 GMT
  • Euro/pound: UP at 85.65 pence from 85.63 pence
  • Euro/dollar: UP at $1.1014 from $1.1009
  • Dollar/yen: UP at 109.07 yen from 108.97 yen
  • West Texas Intermediate: DOWN 22 cents at $56.58 per barrel
  • Brent North Sea crude: DOWN 28 cents at $61.78 per barrel
  • New York – Dow: UNCHANGED at 27,691.49 (close)
  • London – FTSE 100: UP 0.5 percent at 7,365.44 (close)