Hong Kong stocks tumbled in late trading on Wednesday as US-China tensions escalated after the US ordered China’s consulate in the city of Houston to close within 72 hours.
In quickly moving news, the Chinese Foreign Ministry said the United States had demanded Beijing close its consulate in the Texas city, calling the move “unprecedented escalation” and threatening retaliation. It was the latest instance of friction between the world’s two largest economies on everything from trade to the South China Sea and Beijing’s tightening grip over Hong Kong.
US news outlets reported that a State Department official confirmed it had ordered the consulate closed, citing concern about American intellectual property and the privacy of its citizens. There was no immediate statement on the State Department website. But Houston media reported that local police and fire officials had responded to reports that documents were being torched in the consulate’s courtyard, citing local police.
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The Hang Seng Index, which had gains in the early session before turning down some before and after the lunch break, began sliding hard on the news over the consulate, closing down by 2.3 per cent – or a loss of 577.72 points – to 25,057.94. That was its worst fall in six weeks, when it essentially fell by the same percentage. Of the 50 members of the benchmark, 46 posted losses.
“The market is panicking about the surprising action taken by the US, and worrying about tensions further escalating and the revenge by China,” Alan Li, portfolio manager at Atta Capital, said of the Hang Seng benchmark, which began sliding at about 3:22pm and quickly accelerated.
It was a reminder of how quickly market sentiment can change. On Tuesday, the Hong Kong market climbed 2.3 per cent on excitement about an upcoming new tech index and Ant Group’s plans to dual list in the city and in Shanghai.
But on Wednesday, Hu Xijin, the influential editor-in-chief of The Global Times, tweeted at 2:56pm that the consulate had been ordered to be closed in what he called a “crazy” move.
Mainland stock markets close at 3pm and did not have time to react.
Offshore renminbi weakened to 7.0159 per dollar from Tuesday’s 6.9728, following the consulate headlines. US futures were down. Gold, a safe haven, rose nearly 1 per cent to US$1,858.27, as it continues rising towards an all-time high.
“Investors are worried that the China and US relationship may get worse,” said Kenny Wen, wealth management strategist at Everbright Sun Hung Kai. “The Hang Seng Index dropped below the 10-day moving average, which also created large selling pressure.”
Individual stocks saw quick dramatic slides as traders scrambled for the exits.
Index heavyweight Tencent, for example, was trading down about 2.5 per cent, at HK$550 at 3:28pm, but then quickly tumbled to HK$539 at the close, leaving it down by 4.7 per cent for the day.
Meanwhile, Alibaba, the e-commerce giant and owner of the South China Morning Post, was trading down 1.8 per cent at HK$252.40 at 3:27pm, but then fell sharply to HK$248 to end the day down 3.5 per cent.
In Hong Kong, the latest and most serious outbreak of coronavirus is also weighing on sentiment. Residents returning from the United States and Kazakhstan will be required to quarantine in hotels rather than at home, and present proof they are free from Covid-19 before boarding flights to the city, as the government unveiled a range of stepped-up measures amid the worsening coronavirus situation.
The third wave of coronavirus infections killed two more elderly patients as the city confirmed another 61 confirmed cases on Tuesday.
Cases have also been rising in the US, which has recorded more than 140,000 deaths from the coronavirus.
US President Donald Trump also expressed his willingness to work with China and other countries to produce a coronavirus vaccine.
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This article Hong Kong stocks tank as US orders China’s Houston consulate to close within 72 hours first appeared on South China Morning Post