Hong Kong benchmark Hang Seng Index (HSI) was the worst performance in Asia, closing 1.3%, after recovering slightly from a drop of more than 3% earlier in the day. From China Shanghai Composite (SHCOMP) index fell 0.9%. The rest of the region also struggled: South Korea Kospi (KOSPI) and Japan Nikkei (N225) lost 1% and 0.6%, respectively.
“Investors’ nerves were shaken” by the sanctions, “muddying geopolitical waters,” said Jeffrey Halley, senior market analyst for Asia-Pacific at Oanda.
Washington announced sanctions on Monday against two Chinese officials for “serious human rights abuses” against Muslim Uighurs and other ethnic minorities in Xinjiang. The European Union, Canada and the United Kingdom imposed sanctions on the same individuals and others, a demonstration of unity on the part of Western allies while continuing to express their condemnation of Beijing’s treatment of Uighurs in the region.
China denounced the measures and reacted against the European Union almost immediately, announcing its own sanctions against 10 EU politicians and four entities for “spreading lies and misinformation maliciously”.
Guy Verhofstadt, an important member of the European parliament, went so far as to say that China’s decision to strike back “killed” a major investment agreement between Brussels and Beijing that has not yet been ratified. The business, which has been going on for years, is planned to rebalance trade with the world’s second largest economy.
Shortly after Chinese sanctions were announced, the European Parliament’s second largest group of legislators said they would not engage in negotiations on the agreement until the measures were lifted.
The outbreak comes after a few tense days. Talks between the United States and China in Alaska led to a tense confrontation at the end of last week, during what was the first personal meeting between leaders on both sides since U.S. President Joe Biden took office.
The news of the sanctions made it a particularly difficult day for tech stocks in Hong Kong. The Hang Seng Tech Index, which tracks 30 major technology companies, including Alibaba and Tencent, fell 2.6%. Alibaba (BABYSITTER) and Tencent (TCEHY) fell 0.5% and 0.8% each. Meituan and Xiaomi lost 5.2% and 4.1%, respectively.
The nervousness of the market also seemed to hurt the Chinese internet giant Baidu, (BIDU) which launched a secondary quote in Hong Kong for a lukewarm response on its first trading day on Tuesday.
The $ 3.1 billion share price of the company, which already operates in New York, was discouraged. It ended the day at 252.20 Hong Kong dollars ($ 32.47), less than 1% above its offer price of 252 Hong Kong dollars ($ 32.45). It was the largest secondary list in the city since JD.com (JD) raised $ 4 billion last June, according to data provider Refinitiv.
“The battle lines are being drawn between [the] USA and China around the domain of Internet technology, “said Stephen Innes, chief global market strategist at Sydney-based online broker Axi.” You need to think that last week’s unfriendly meeting is probably holding on to some enthusiasm, because [the] The United States can continue to restrict Chinese technology. “
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