Via Financial Times

Asian stocks fell on Friday as investors braced for retaliation by China after US president Donald Trump signed into law a bill backing Hong Kong’s anti-government demonstrators.

In afternoon trading, Hong Kong’s benchmark Hang Seng index sank 2.1 per cent — its biggest fall in two weeks — and China’s CSI 300 of Shanghai- and Shenzhen-listed shares shed 1.3 per cent.

South Korea’s Kospi fell by a similar amount as the country’s central bank shaved its growth and inflation forecasts for the year, while holding its benchmark lending rate at 1.25 per cent. 

Japan’s Topix slipped 0.5 per cent after industrial production in October shrank by the most in almost two years, underscoring how the economy has been buffeted by US-China trade tensions. 

Traders in the region were on edge after Mr Trump this week signed two US bills seen as supporting Hong Kong’s pro-democracy protesters, defying calls from China to block the legislation and putting the territory’s special trade status at risk. 


The value of Chinese goods facing new tariffs from December 15

Investors are “concerned about what retaliatory action China might take against the US for signing the Hong Kong bill and whether that will derail the trade talks” between Beijing and Washington, said Andrew Sullivan, director of stock broker Pearl Bridge Partners. 

A new round of US-imposed tariffs on $156bn of Chinese goods is set to come into force on December 15 if negotiators do not finalise a so-called “phase one” trade deal. “Traders are probably getting a tad jittery” about that date, said Stephen Innes, head Asia market strategist at broker AxiTrader. 

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Among the biggest decliners in Hong Kong stocks were drugmakers CSPC Pharmaceutical and Sino Biopharmaceutical, which fell by 11.1 per cent and 5 per cent respectively.

The weakness came after international pharmaceutical companies agreed to slash the prices of dozens of drugs in China. On Friday, it was reported Chinese authorities said they would speed up a procurement programme that has pushed down prices of generic drugs. 

Traders across Asia also lacked any cues from Wall Street, which was closed overnight for the US Thanksgiving holiday, and liquidity was thin. US treasuries were flat, with the yield on 10-year government bonds steady at 1.765 per cent. S&P 500 futures were pointing to losses of 0.3 per cent when Wall Street opens for a half-day of trading on Friday.

In precious metals, gold was on track for its worst month in three years. The metal, seen as a haven in times of uncertainty, has shed 3.6 per cent in November as investors had become more upbeat on the prospects of the US economy and the potential for a resolution to the US-China trade war.