(ATF) US President Donald Trump has extended his anti-China tech war beyond Huawei to banning Americans from dealing with video-sharing sensation TikTok and the WeChat messaging app and their parent companies Bytedance and Tencent on national security grounds.
Chinese and most Asian stock markets lost ground today on the renewed evidence that a desperate Mr Trump will stop at nothing when it comes to anti-Chinese undertakings which – according to his former strategist Steve Bannon – are the core of his re-election strategy.
Tencent stock declined by 5% in Hong Kong. The Hang Seng Index declined by 1.60%. The yuan, too, was hit and by noon HK time was trading at a substantially weaker 6.9739 to the US dollar by comparison to the central parity rate of 6.9408 set by the People's Bank of China.
I consider the whole affair as largely a kneejerk reaction – though, of course, there is the issue that needs to be taken seriously for another three months or so, and was flagged by former US National Security Adviser John Bolton, that Mr Trump will do everything he considers necessary to enhance his re-election chances.
As things stand, the yuan recovered its composure on Friday afternoon and was at 6.9578 to the dollar at 7pm HK time.
The Hong Kong dollar actually never flinched to begin with, trading in a day range of 7.7499 - 7.7505 and currently is quoted at 7.7503.
I see no fundamental reason why citation of absurdly Trump-concocted national security pretexts should change the upward trend of the past two months of the Chinese currency, which has been trading – often tick by tick – with the price of gold and reflected the vast difference in China and the US' economic performance.
China's surprise outperformance in July exports – up 7.2% year-on-year vs economists' expectations of a 0.6% decline – underlines yet again where relative economic performances stand.
Chinese imports fell 1.4% and that helped widen the China trade surplus to $62.33 billion for July, a strongly yuan-positive number.
The US dollar, now trading at 93.1950 on the dollar index (DXY), came off the 92 handle in the course of the Asian trading day. But there's nothing in dollar fundamentals that would support a further rise except perhaps a stronger than expected US jobs report tonight.
Gold, meanwhile, trades at $2,060.00 and – as with the yuan – there are no fundamental changes that will in the near-term change the upward move that started in earnest on July 17 at the $1,800 level.