Chinese equities and the yuan faced a decline as concerns over escalating Sino-American tensions continued to weigh on investor sentiment following a series of disappointing economic updates.
The Hang Seng China Enterprises Index plummeted over 3%, marking its most significant one-day drop in nearly a month. Concurrently, the onshore CSI 300 Index saw a decline of up to 1.7%, while the offshore yuan weakened by 0.3% to 7.25 against the US dollar, reaching its lowest level in over three months.
During afternoon trading, stock losses exacerbated following reports that US President-elect Donald Trump is poised to appoint individuals known for their critical stance on China to key positions in his administration.
As per a report from Bloomberg News, Senator Marco Rubio, a vocal critic of China’s economic rise, is anticipated to be appointed as the secretary of state, while Representative Mike Waltz, known for deeming China as a significant threat to the US, is poised to serve as the national security advisor.
This development heightened concerns regarding escalating geopolitical tensions, with the subdued sentiment being further fueled by China’s lackluster fiscal stimulus announcement the previous week and a slower-than-expected credit expansion in October.
Homin Lee, senior macro strategist at Lombard Odier, remarked that Trump’s strategic appointments signal a high probability of enforcing punitive tariffs on China as part of his campaign promise.
Meanwhile, Chinese equities face ongoing challenges amid a fragile economic recovery and government hesitance towards extensive fiscal measures. The recent legislative meeting prioritized local government debt issues over robust consumption stimulus, disappointing some investors concerned about insufficient economic support given potential tariff tensions under the new US administration.
Despite talks of tax cuts to revive the housing market, Chinese developer shares, as indicated by Bloomberg Intelligence, experienced a decline exceeding 4%.
Moreover, Billy Leung from Global X ETFs in Sydney noted that apprehensions in Hong Kong stocks stem from reactions to Trump’s appointments and concerns about economic stimulus meeting market expectations.
