Local shares on Friday ended sharply lower amid renewed tensions between the US and China over Chinese telecommunications equipment giant Huawei Technologies Co Ltd (華為) and China’s plan to introduce a national security law in Hong Kong.
The TAIEX on Friday finished down 197.16, or 1.79 percent, at 10,811.15 on turnover of NT$177.183 billion (US$5.9 billion), almost flat from a close of 10,814.92 on May 15.
The market was down across all major sectors, in particular electronics shares, which finished down 1.99 percent from Thursday’s close.
Taiwan Semiconductor Manufacturing Co (TSMC, 台積電), the world’s largest wafer foundry and a chip supplier to Apple Inc, closed 1.85 percent lower at NT$292.
Largan Precision Co (大立光), a supplier of smartphone camera lenses to Apple, sank 2.29 percent to close at NT$3,840, while iPhone assembler Hon Hai Precision Industry Co (鴻海精密) finished 1.47 percent lower at NT$73.60.
With the US threatening to enforce fresh sanctions on Huawei, analysts said that any US attempt to require licenses for sales of semiconductors to Huawei that were made abroad with US technology could seriously affect Taiwan-based IC designers.
MediaTek Inc (聯發科), a local fabless semiconductor company that provides chips for wireless communications and high-definition TVs, ended down 4.84 percent at NT$442, while Novatek Microelectronics Corp (聯詠) fell 2.46 percent to NT$198.50.
Realtek Semiconductor Corp (瑞昱) and RichWave Technology Corp (立積電子) also declined 5.37 percent and 4.64 percent to close at NT$246.50 and NT$144 respectively.
Capital Investment Management Corp (群益投顧) analyst Liao Chien-you (廖健佑) said that Taiwan’s stock market was likely to remain in consolidation mode in the near term given that the TAIEX closed at less than 11,000 points.
Investors should not underestimate the effects of the US-China tug-of-war, which shows no sign of ebbing amid mounting uncertainty, he said.
Elsewhere in Asia on Friday, Hong Kong led a sell-off across Asian equities after China introduced proposals to enact the national security law in the territory, fanning geopolitical tensions and overshadowing optimism about a further easing of lockdowns due to the COVID-19 pandemic across Europe and the US.
After months of concentrating on the economic effects of the novel coronavirus, traders’ attention flipped back to China-US tensions, already exacerbated by US President Donald Trump’s constant criticism of Beijing’s handling of the pandemic.
On the first day of the rubber-stamp Chinese National People’s Congress (NPC), Beijing submitted proposals to strengthen “enforcement mechanisms” in the financial hub, after it was rocked last year by seven months of massive and often-violent pro-democracy protests.
Plans for the announcement had sparked warnings of “the end of Hong Kong” and fears of further unrest, which crippled the territory’s economy, even before the coronavirus struck.
It also sparked criticism from Washington, with the US Department of State saying that the move would be “highly destabilizing, and would be met with strong condemnation from the United States and the international community.”
Hong Kong’s Hang Seng on Friday plunged 1,349.89 points, or 5.6 percent, to 22,930.14, a 3.6 percent drop from a close of 23,797.47 on May 15, with financial and property firms battered as investors fretted about the territory’s economic future.
“Riots in the street and plummeting real-estate markets might be the least of Hong Kong’s building wall of worry, as this authoritarian national security plan will most certainly bring into question HK status as a global banking center,” AxiCorp Financial Services Pty chief market strategist Stephen Innes said.
US lawmakers have already passed a law that would strip the territory’s preferential trading status in the US if it no longer enjoys autonomy from Beijing.
“The geopolitical risks are meaningful,” BlueBay Asset Management LLP chief investment strategist David Riley told Bloomberg TV. “It’s a concern for the market, and is a potential source of weakness and a correction.”
Everbright Sun Hung Kai Co (大新鴻基) strategist Kenny Wen (溫傑) added: “We could have new protests. Local tensions could trigger Sino-US tensions and the latter is much more stressful for market sentiment and macroeconomy.”
Losses elsewhere in Asia were shallower than in Hong Kong.
Tokyo’s Nikkei 225 on Friday fell 164.15 points, or 0.8 percent, to 20,388.16, but gained 1.8 percent from 20,037.47 a week earlier.
The Shanghai Composite on Friday closed down 54.16 points, or 1.9 percent, at 2,813.77, dropping 1.9 percent from 2,868.46 on May 15.
Seoul’s KOSPI on Friday dropped 28.18 points, or 1.4 percent, to 1,970.13, but rose 2.2 percent from a close of 1,927.28 a week earlier.
Manila and Bangkok dropped more than 1 percent.
Singapore shed two percent and Sydney was 0.8 percent off, while Wellington and Mumbai dropped 0. 4 percent.
The NPC also saw leaders make the rare move of not setting an annual growth target this year due to the pandemic, with Chinese Premier Li Keqiang (李克強) saying that Beijing would “give priority to stabilizing employment and ensuring living standards.”
Concerns about China-US tensions took away from news that more countries were edging out of lockdowns as new deaths and infections ease, and observers said that the worst of the pain for the global economy might have passed.
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