Market Close Sep 03

Positive data eclipsed by US-China politics

US limits on Chinese officials weigh; More evidence of recovery in China; Tech sector slammed by India ban

Positive data eclipsed by US-China politics
Share of Tencent fell 2% in Hong Kong after India banned one of its popular video games, plus a further 117 Chinese apps, following another deadly clash on the India-China border a few days ago. File photo by Reuters.

Hong Kong: Investors turned cautious as signs of more tensions emerged between the world’s two largest economies after the United States announced tighter limits for Chinese officials in retaliation for 'excessive' controls on American officials in China.

China is also fast-tracking the development of its domestic semiconductor industry to counter Trump administration restrictions, Bloomberg News reported, in signs there could be more friction between the two superpowers.

Earlier, markets had been boosted by strong service sector numbers from China which added to the optimism after Wall Street’s rally overnight.

Still, Japan’s Nikkei 225 index ended in positive territory adding 0.94% and Australia’s S&P ASX 200 climbed 0.81%.

Hong Kong’s Hang Seng index eased 0.45% weighed by the weakness in the tech sector and China’s CSI300 retreated 0.55%.

But India’s ban on Chinese apps and the rotation out of the tech sector at Wall Street weighed.

Meanwhile, the Caixin China General Services Business Activity Index came in at 54.0 in August, signalling continued recovery in services activity in August. While the reading is 0.1pp lower than July, the latest uptick extended the current sequence of growth to four months.

“It signalled continued recovery in services activity in August. Sub-indexes imply solid new businesses, improvement in services-related employment and higher prices,” Goldman Sachs analysts said in a note.

Hong Kong markets were also pressured after business conditions worsened further in August according to a Markit Hong Kong PMI reading. The PMI declined to 44.0 in August from 44.5 in July as the resurgence of coronavirus cases in early July and related tightening of virus control measures such as social distancing and closure of selected business operations weighed on activity growth.

“Confidence in the year-ahead outlook remained negative as firms expressed worries over not just tighter Covid-19 measures, but also a renewed US-China trade war dispute, increasingly cautious consumer behaviour, and business insolvency,” said Bernard Aw, Principal Economist at IHS Markit.

"With unused capacity persisting across the private sector, the labour market is set to remain subdued in the coming months."

The US dollar continued its recovery rising above the 93 level against a basket of currencies and gold weakened falling 0.45% to $1,932 per ounce.

Asian credit markets were firm with the Asia IG index marginally tighter at 56-1/2/57-1/2 and the primary markets have seen the emergence of deals like Zhenro Properties’ greenbondsCK Asset’s perpetual notes, and BoComm’s dual trancher.

ATF China Bond 50 Index: ATF indices record sharp moves; industrials post gains

Also on Asia Times Financial

China to roll out red carpet for foreign investors in bonds 

Bland, muted response in China to Indian app bans 

China's bureaucrats tussle over control of the Treasury 

China's overseas investors turn from US to SE Asia, elsewhere 

Asia Stocks

· Japan’s Nikkei 225 index added 0.94%

· Australia’s S&P ASX 200 climbed 0.81% 

· Hong Kong’s Hang Seng index eased 0.45%

· China’s CSI300 retreated 0.55%

· The MSCI Asia Pacific index advanced 0.33%.

Stock of the day

Xiaomi and Tencent shares tumbled after India banned 118 more Chinese apps including Tencent Holdings’ popular video-game PUBG and Xiaomi’s ShareSave. Xiaomi fell as much as 8.4% and Tencent slid 2.2% – they were the most actively traded shares on the Hong Kong exchange.