Asian Stocks Weaker, Dragged by Trade Tensions

Asian markets were largely weaker in afternoon trade on Tuesday as prospects of escalating trade spat fuelled another selloff in US equities overnight.

Tech shares headed the fall in Asia after their US peers, which get a large chunk of their revenue from China, declined overnight on Wall Street after news that the US Treasury Department is drafting curbs to stop companies with at 25 percent Chinese ownership from purchasing US tech firms.

Taiwan’s TSMC slumped 1.8 percent, while South Korean chipmaker SK Hynix Inc dropped 1.55 percent. Hong Kong’s index heavyweight Tencent Holdings Ltd slipped 1.7 percent.

“Unlike the seemingly spur-of-the-moment tweets by President Trump and retaliatory exchange of tariffs, Washington’s bid to protect intellectual property is an issue at the heart of a trade row between two powers battling for future global supremacy,” wrote Yoshimasa Maruyama, who is the chief market economist at SMBC Nikko Securities in Tokyo.

As a response, China and the European Union released a joint statement that warned on the consequences of a full-blown trade war.

Chinese Vice Premier Liu He, one of Chinese President Xi Jinping’s top economic advisers, said that China and EU had joined forces to defend the multilateral trading system. When Liu spoke at press conference following the talks on Monday in Beijing, he said that China is prepared to face off against US tariff threats.

“Unilateralism is on the rise and trade tensions have appeared in major economies. China and the EU firmly oppose trade unilateralism and protectionism and think these actions may bring recession and turbulence to the global economy,” said Liu.

The Shanghai Composite was 0.6 percent lower, while Shenzhen Component reversed its losses in the morning session and traded 0.4 percent higher. Meanwhile, Hong Kong’s Hang Seng Index was 0.1 percent lower.

White House trade adviser Peter Navarro stated in a separate report on American restriction on Chinese Investments would not be as damaging to growth as markets have feared.

“There’s no plans to impose investment restrictions on any countries that are interfering in any way with our country. This is not the plan,” said Navarro, stating that the markets were just overreacting to recent reports that the government would restrict foreign investment.

Steven Mnuchin, who is the Treasury Secretary, has pressed within the administration for a negotiated settlement to trade frictions with China. He has recently denied that measures would be aimed particularly at China.

The restriction is “not specific to China, but all countries that are trying to steal our technology,” he said on Monday in a tweet.

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