Sat, Mar 24, 2018 - Page 12 News List

Markets hit as China counters US move

COLLATERAL DAMAGE:Taiwanese and South Korean companies could be hardest hit by the US’ trade measures, as they dominate China’s supply chain, a banker said


World stock markets yesterday tumbled on escalating trade war fears after US President Donald Trump imposed steep tariffs on Chinese imports and Beijing unveiled its own measures against US goods.

Asian stock markets were the heaviest fallers, playing catch-up after European indices and Wall Street had already slumped in Thursday trading on the latest developments.

The TAIEX closed down 182.51 points, or 1.66 percent, at 10,823.33, with stock in the aerospace, information and communication technology, and machinery industries falling heaviest, as those sectors were most rattled by news of the tariffs, which could be as high as 25 percent.

On the Taiwan Stock Exchange, the electronics sector fell 2.22 percent, the optoelectronics sector dropped 3.31 percent and semiconductors were down 2.40 percent. Most traditional industry stocks fell by less than 1 percent.

Kevin Lin (林成蔭), vice president of investment consultancy Caizischool Co (財子學堂), said that while a trade war between the US and China would impact the Taiwanese stock market, it is unlikely to immediately cause record fluctuations in the local market.

The index is likely to move between 10,850 and 10,739, given that about half of local stocks are in electronics, Lin said.

Elsewhere in Asia, Tokyo closed down 4.5 percent, hitting a near six-month low, with Japanese exporters also hammered by a surging yen, which is considered a go-to currency in times of turmoil and uncertainty.

In Hong Kong, the Hang Seng Index shed 2.5 percent, while Shanghai gave up a hefty 3.4 percent and Sydney fell 2.0 percent.

Seoul was 3.2 percent down and Singapore dived 2.4 percent, while Wellington gave up 1 percent and Manila dropped 2.3 percent.

Wall Street was on Thursday sent spiraling, with all three main indices shedding between 2.4 percent and 2.9 percent.

“The effects are likely to be felt more strongly in the US, and increase both consumer and producer prices,” JP Morgan Asset Management global market strategist Hannah Anderson said.

“Exports are extremely important to the Chinese economy, but have been trending less so in recent years and the US has been shrinking as a share of China’s export market,” she said.

“The equity market will bear the brunt of the market reactions. Most impacted will be the US, [South] Korea and Taiwan, as companies domiciled in these markets make up a significant portion of the global production chain of Chinese exports,” Anderson said. “Chinese-listed firms, on the other hand, derive most of their sales — about 80 percent — from the domestic market.”

Analysts said that traders were also spooked because China is the biggest buyer of US government bonds, which the US needs to sell to keep its economic wheels greased.

The US dollar, meanwhile, dropped below ¥105 for the first time since Trump was elected president in November 2016, while the greenback was also down against the euro.

Additional reporting by CNA

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