• Wednesday, Nov 20, 2019
  • Last Update : 10:04 am

Huawei and trade war weigh on Asian markets

  • Published at 09:13 am May 21st, 2019
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President Donald Trump effectively barred Huawei from the US market amid an escalating trade war with Beijing, AFP

On Monday, Google said it severed ties with the Chinese telecoms giant Huawei

Concerns about the worsening Huawei row and the broader China-US trade war have put pressure on Asia equities, with analysts warning the crisis could rumble on for some time.

Regional investors on Tuesday were spooked by a sharp drop in New York's tech-rich Nasdaq after Google said it was beginning to sever ties with the Chinese telecoms giant, days after Donald Trump's decision to bar it from the US market and put it on a sales blacklist.

The development- with the US citing national security concerns- has muddied the waters in the tariffs stand-off between Washington and Beijing, which was thought to have been close to conclusion at the start of the month.

And now some observers are warning that stalled talks between the economic superpowers might not see any progress before a hoped-for meeting between Trump and China's Xi Jinping at the G20 in June.

"The market was a little optimistic that a trade deal would just get done here this month," Brett Ewing, chief market strategist at First Franklin Financial Services, told Bloomberg News.

Dealers have "definitely come to terms with a longer term trade negotiation process".

While the Commerce Department issued a 90-day reprieve on the ban on dealing with Huawei, saying breathing space was needed to avoid huge disruption, the two appear to be digging their heels in.

And on Monday China's envoy to the European Union called the Huawei move "wrong behaviour", adding "there will be a necessary response".

Zhang Ming warned: "Chinese companies' legitimate rights and interests are being undermined, so the Chinese government will not sit idly by."

Regional tech firms were a mixed bag, with Hong Kong market heavyweight Tencent down 1.3% but Lenovo and AAC technologies well up. Sony and Sharp were around 4% down in Tokyo and Taiwan Semiconductor gave up almost 2% in Taipei but Seoul-traded Samsung rose more than 3%.

May on the ropes

Among broader markets Hong Kong fell 0.4%, Sydney lost 0.2%, Singapore shed 0.4% and Taipei lost 0.1%, along with Wellington.

Tokyo went into the break 0.4% down.

However, Shanghai edged up 0.3%, while Seoul added 0.5%, with Manila and Jakarta also slightly higher.

"The US-China trade war is in danger of assuming Brexit-like characteristics- long and drawn out with a series of false dawns, but with no discernible progress made after a lot of emotional noise," said OANDA Senior Market Analyst Jeffrey Halley.

"China has been remarkably quiet on the retaliation front, but I suspect that won't last for long now. When it does come, its effect on markets could be more powerful initially than recent US measures."

On currency markets the pound remains lodged around four-month lows against the dollar as Prime Minister Theresa May struggles to get opposition Labour backing for her Brexit deal, meaning it is likely to fail on her fourth attempt to pass it through parliament next month.

There is growing concern May will step down if she loses again, leaving the path open for a hardliner who is keen for a no-deal divorce, which many experts say will be economically destructive.

Oil prices rose after major producers said supplies were sufficient and stockpiles still rising, but gains were capped by the China-US tensions.