China shares slump as shape of Trump administration raises anxiety
CHINA-STOCKS/MIDDAY (UPDATE 2):China shares slump as shape of Trump administration raises anxiety
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Hang Seng breaks support at 20,000
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Yuan slides to lowest since August
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Chip, defence shares hit hardest
By Jiaxing Li
HONG KONG, - Hong Kong stocks tumbled to a seven-week low on Tuesday and Chinese markets notched their heaviest fall in nearly a month on worries a China hawk will be appointed as the United States' top diplomat and take a hard line on trade and tariffs.
Hong Kong's benchmark Hang Seng collapsed through support at the 20,000 level and closed 2.8% lower at 19,846.
The Shanghai Composite closed 1.4% lower at 3,421.97, its largest one-day drop since mid October, and the yuan slid to a three-month trough.
Donald Trump is expected to tap U.S. Senator Marco Rubio to be his secretary of state, sources told Reuters on Monday, arguably the most hawkish option on Trump's shortlist and someone who has advocated for a muscular China policy.
Chip stocks were knocked from a three-year high with heavy selling across technology related shares and in strategic sectors that had rallied in recent sessions on bets that state support would offset any U.S. crackdown.
"The market is now worrying that there will be more rapid negative China policy emerging from the Trump administration," said Steven Leung, executive director of institutional sales at brokerage UOB Kay Hian in Hong Kong.
"Their hawkishness could be more than expected."
Trump has also picked Mike Waltz to be his national security adviser, two sources familiar with the matter told Reuters, a retired Army Green Beret who has been a leading critic of China.
China's blue chip CSI300 fell 1.1% with the semi-conductor sub-index dropping 2.7% and chipmaker SMIC tumbling 8% in Hong Kong. Reuters reported over the weekend that the U.S. ordered chip giant TSMC to halt shipments of advanced chips to Chinese customers.
CSI defence stocks slid 4.3% and an index of stocks in the navigation satellite industry fell 2.7%.
Hong Kong's technology sector fell more than 4% with e-commerce titans favoured by foreign investors, such as Alibaba, down 3.8%, JD.com, down 5% and other consumer-focused firms among the largest losers.
DOWNBEAT DATA
A tougher-than-expected export environment is particularly worrying for investors since China's economy has been sputtering and authorities have repeatedly disappointed expectations for government spending to stimulate domestic demand.
Most recently on Friday, a highly-anticipated policy meeting resulted in a plan to restructure local debt but no new or urgent plans to encourage consumption which have been missing from a slew of supportive announcements since late September.
Data this week also highlighted weak and deteriorating confidence, with consumer price growth the slowest in four months in October and new lending collapsing to a three-month low, according to figures released late on Monday.
China's yuan fell for a third straight session against a runaway dollar, skidding to its weakest since early August at 7.2390 per dollar.
"Weak loan growth for both households and corporates continues to underscore fragile domestic demand," analysts at Bank of America said in a note.
"The recent pivot in policy stance was a welcoming sign but more is warranted to stabilise growth."
Market volume was heavy with above-average trade in Shanghai and Hong Kong, as shares in the latter quickly retrace September's explosive rally.
"From a pure price action point of view HK is trading below the lows on Sept. 27 ... which means all those who bought on and after Sept. 27 are now sitting on losses," said Wong Kok Hoong, head of equity sales trading at Maybank in Singapore.
"And probably cutting positions."
This article was generated from an automated news agency feed without modifications to text.