Hong Kong and mainland stocks tanked after Beijing ordered the US to close its consulate in Chengdu, a retaliatory move that added to escalating US-China tensions and became what one analyst called the “last straw” for spooked investors.
On the mainland, where stocks have been soaring of late, the sell-off on Friday was fierce.
The CSI 300 of large caps in Shanghai and Shenzhen plummeted 4.4 per cent, the Shanghai Composite Index fell 3.9 per cent, and the Shenzhen Composite Index fell 5 per cent. In Shenzhen, with more than 2,000 stocks on the benchmark, only 177 stocks posted any gains at the close. All three benchmarks posted their second consecutive week of losses due to Friday’s collapse.
Hong Kong’s Hang Seng Index fell 2.2 per cent, or nearly 560 points. That left it with its second straight week of losses. It lost 1.5 per cent this week — with a 2.3 per cent slide on Wednesday on news that the US was shutting down China’s consulate in Houston, Texas — on top of 2.5 per cent the previous week.
The market sell-offs could continue in Hong Kong and China if tensions between the world’s two largest economies do not cool down over the weekend, said Stanley Chan, director of research at Emperor Securities.
“If there is no further escalation, then the markets will stabilise. But if tensions continue to mount, then the markets may need to go down a bit more to test lower levels,” he said.
Before the latest spike in US-China tensions, mainland stocks had been shooting up for weeks on upbeat sentiment about the mainland’s economic recovery, as the nation became the first in the world to successfully contain the coronavirus and then show steady signs of economic recovery.
While there had been some hand wringing by some worried about another 2015 stock market bubble, investors had been ecstatic over jaw-dropping returns on the
Index heavyweight Tencent dropped 5.2 per cent, Alibaba fell 3.1 per cent, while Meituan Dianping tumbled 4.2 per cent.
Investor telemedicine darlings were not spared. Alibaba Health Technology plunged 6.7 per cent, while Ping An Good Doctor dropped 5 per cent.
Gold, a safe haven asset, continued to rise, heading ever closer to its all-time high. It rose 0.4 per cent to US$1,894.81. Gold hit a record high of US$1,921.17 in 2011. In the US, futures pointed down, with tech stocks under continued selling pressure.
“All bad news all around,” said Alan Li, portfolio manager at Atta Capital. “Weekly US unemployment rose for the first time in four months. The second US stimulus package was delayed. [China’s central bank] tends to tighten liquidity in the second half. US and China tensions escalating is the last straw to the market.”