Hong Kong stocks slip as US expands its Internet security campaign to ‘untrusted’ Chinese apps; Tencent slides
- US secretary of state blasts ‘untrusted’ Chinese-owned apps
- Market cap of China’s stock market is at US$9.74 trillion – the highest since the 2015 meltdown
Hong Kong stocks slipped Thursday, with index heavyweight Tencent declining on fears its WeChat social media app could be swept up into the US “clean network” campaign claiming Chinese-made technology poses security risks.
Overnight, US Secretary of State Mike Pompeo called on US app stores to remove “untrusted” Chinese-owned apps, including WeChat and TikTok. This expanded the US charge against Huawei and other Chinese tech giants over a mix of security and human rights abuse claims.
Tencent fell as much as 3.1 per cent, before narrowing its loss to 1 per cent at the close.
Other new economy stocks were mixed. Alibaba, the e-commerce giant and owner of the South China Morning Post, recouped early losses and gained 0.5 per cent, while food delivery giant Meituan Dianping rose 1.3 per cent.
The Hang Seng Index narrowed its decline to 0.7 per cent to 24,930.58 from a 1.8 per cent drop, snapping a two-session winning streak.
“Mike Pompeo announced a five-pronged ‘clean network’ aimed at curbing potential national security risks from China. People think that WeChat will be the next target very soon,” said Alan Li, portfolio manager at Atta Capital.
“Banning WeChat would not only impact Tencent. The communication to Chinese people outside China may go back to the telephone and email age,” he added.
Chinese oil giants were the major winners, as US crude stockpiles have fallen more than expected. Sinopec added 1.5 per cent. CNOOC rose 1.4 per cent.
“The Hong Kong market in general failed to hold gains as investors closely watch geopolitical risks and Sino-US tensions,” said Bruce Pang, head of macro and strategy research at China Renaissance Securities Hong Kong. “Market sentiment is on edge and vulnerable to negative news flow, in our view. We expect limited market upside, as investors are navigating potential risks ahead.”
Meanwhile, the Shanghai Composite Index closed 0.3 per cent higher to 3,386.46, reversing the losses earlier in the day. That was its fifth straight session of advancing. But Shenzhen Composite Index declined 0.7 per cent, and tech board ChiNext shed 1.6 per cent.
Military and aerospace stocks led the gain. AVIC Shenyang Aircraft and aircraft maker Avicopter surged by the daily limit of 10 per cent.
Vaccine-related and healthcare stocks were among big losers on the mainland as traders took profits from surges since the pandemic. Chengdu Kanghua Biological Products and Shenzhen Kangtai Biological Products plunged by the daily cap of 10 per cent.
Liquor stocks were also laggards, as the government of Guizhou province where Kweichow Moutai is based told distributors not to raise prices. Kweichow Moutai fell 1.7 per cent, while Shanxi Xinghuacun Fen Wine Factory lost 4.4 per cent.
China’s total market cap was at US$9.74 trillion on Thursday, the highest since October 2015, and 2.6 per cent, or US$258 billion, from topping US$10 trillion.
Reaching that milestone would be satisfying to China because it would mark a recovery to the peak level of the 2015 market, just before it melted down.
Some worry has surfaced in recent weeks that the China markets are overheated. Chinese state media warned investors be rational in their investments and Chinese authorities cracked down on illegal margin lending.
Traders are watching China’s central bank, which is expected to hold back on more large-scale stimulus as the Chinese economy continues to show signs of improvement after the worst of the coronavirus. Ma Jun, a member of the monetary policy committee of the People’s Bank of China, said Beijing should maintain its current policies and needs to save some “bullets” should the recovery stutter.
