Chinese Indexes Down as Trade Worries Return



Huawei update

No, we’re not talking about whether Huawei will get Android updates from Google (GOOG) now that President Trump has announced lifting the ban on Huawei after meeting Chinese counterpart Xi Jinping at the G20 meeting last weekend.

We are talking about the new confusion over Huawei. Today, Reuters reported that John Sondermann, a senior official in the commerce department, directed employees to treat Huawei as still blacklisted. That is contradictory to Trump’s promise that lifted the S&P 500 to all-time highs and also boosted Chinese stocks. The stocks of chipmakers also gained on Monday this week on easing trade tensions. Broadcom (AVGO) gained 4.34% on Monday, while Qualcomm (QCOM) and Micron (MU) gained 1.91% and 3.94%, respectively, on the same day. Expect these chipmakers to be under pressure today.

The new update has brought the trade uncertainty back to the markets. Is it slow bureaucracy or a part of mind games? Only time will tell. On the economy front, China’s services PMI data for June was released today. Services PMI came at 52, below the expected 52.6.

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Chinese indexes, stocks, and ETFs

The renewed trade worries led Chinese indexes to fall today. The Shanghai Composite Index fell 0.94% after opening lower. The fall accelerated in the second half of the day. The tech-heavy Shenzhen Component had an even steeper fall at 1.32%.

Yesterday, the iShares MSCI China ETF (MCHI) and the KraneShares China Internet ETF (KWEB) ended flat in the US, while the iShares China Large-Cap ETF (FXI) lost 0.21%. The ETF was down 0.25% in premarket trading at 4:27 AM ET. Among the major Chinese companies listed in the US, Alibaba (BABA) gained 0.23% yesterday. The Chinese retail giant was up 0.71% in pre-market trading at 5:51 AM ET. NetEase (NTES) ADR closed 0.39% lower yesterday.

Hong Kong

Hong Kong’s Hang Seng Index ended flat today even as mainland Chinese indexes saw a sharp decline. 22 stocks in the index gained while 28 declined, leading to negative market breadth. Apart from healthcare, industrials, and utilities, all other sectors ended in the red today. Energy was the biggest loser among sectors. Yesterday, the iShares MSCI Hong Kong ETF (EWH) gained 0.92%.


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