by AFP/ pic by BLOOMBERG
CHINA – Hong Kong stocks dived Thursday after US lawmakers passed a bill supporting the city’s rights, fuelling fears about ongoing China-US trade talks and raising concerns about its economic outlook.
Both houses of Congress overwhelmingly agreed to the bill on Wednesday and sent it to be signed off by Donald Trump.
The Hong Kong Human Rights and Democracy Act requires the president to annually review the city’s favourable trade status and threatens to revoke it if its freedoms are quashed.
They also passed legislation banning sales of tear gas, rubber bullets and other equipment used by Hong Kong security forces in putting down the protests, which are now in their sixth month.
Beijing said Thursday it “strongly” condemned the move and was ready to take measures to “resolutely fight back”.
Officials had already summoned a top US diplomat on Wednesday over the Senate’s passing of the bill and warned of “strong” countermeasures should it be signed into law.
The White House has not threatened to veto the measure and Trump is expected to sign it, according to a source familiar with the matter.
The Hang Seng index dived 1.57 percent, or 422.73 points, to 26,466.88.
The move comes just as US and Chinese negotiators try to put the finishing touches to a much-vaunted mini trade deal that is seen as the first part of a wider agreement. Markets had been rallying in recent weeks on optimism it will be signed off soon.
Now there is a growing fear about the future of Hong Kong’s economy as removal of its US trading status would make it subject to the same tariffs as mainland China.
It’s very tricky
Its unique position has allowed the city to act as a conduit between China and the rest of the world, making it a major trading and financial hub.
“If the bill becomes law, investors will be hesitant to take on the risk,” Hao Hong, head of research at Bocom International, told Bloomberg News. “There are too many moving parts, it’s very tricky.”
However, Stephen Innes at AxiTrader pointed out that while the row was a cause of concern, the Huawei row proved the two sides were able to “compartmentalise issues from the broader phase one trade negotiations”.
He added: “China also must be down to earth, realising that in fighting back against this US populist movement, (it) could lose badly in the global court of public opinion.
“I’m not suggesting it’s a storm in a teapot, but the market has taken this news well in stride. After all, the Hong Kong bill shouldn’t come as a surprise.”
Stocks were down across the board in Hong Kong, with property firms again taking a hiding, having suffered hefty selling in recent weeks owing to the impact of months of violent protests.
Sino Land sank and Henderson Land Development dived 1.4 percent apiece, while Sun Hung Kai Properties shed 0.6 percent.
Tech firms were weighed by worries about the trade talks, with Sunny Optical plunging more than four percent and AAC Technologies off 3.9 percent.
Lenovo lost 1.8 percent and insurance giant AIA was off 1.4 percent while HSBC gave up more than one percent.
Market heavyweight Tencent lost 1.9 percent, while casino firms Sands China, Galaxy Entertainment and Wynn Macau were down between 1.5 and 2.9 percent.