Hong Kong stocks end lower amid protests and rising US-China tensions over proposed national security law

Zhang Shidong

Hong Kong stocks dropped for the first time this week, as US President Donald Trump said that his administration would soon take action against Beijing’s proposed legislation that will crack down on dissidents in the city, further dialling up hostility between the world’s two largest economies.

The Hang Seng Index slid 0.4 per cent, or 83.30 points, to 23,301.36 at the close, ending a two-day rebound following its biggest sell-off in five years on Friday. Mainland’s Shanghai Composite Index slipped 0.3 per cent to 2,837.

While stocks in the US and Europe rallied overnight on optimism about the opening of economies, with Germany planning to lift travel warnings for 31 European countries and the UK announcing measures towards getting back to business, the political risk in Hong Kong was brought to the fore by traders.

Trump said that the White House would soon “do something” about the national security law tailor-made for Hong Kong. His new tweet also raised speculation that he would backtrack on a tentative trade agreement struck with China in January, with Washington ramping up attacks on Beijing for the global outbreak of Covid-19.

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“The economic reopening narrative will continue to get tested by increasingly challenging US-China trade relations,” said Stephen Innes, a strategist at AxiCorp. “The risk of higher US tariffs will loom large, but does any of this matter in the broader scheme of things? It should and it will, but perhaps not as damaging as it has in the past.”

US senators have proposed a bill that would allow for sanctions against anyone with a role in undermining Hong Kong’s autonomous status, and against banks that do business with them. China’s legislators are set to vote on the security-law bill on Thursday in Beijing.

Increased police presence helped to disperse protesters in the city, where the Legislative Council is set to debate a controversial bill that will criminalise disrespect for the Chinese national anthem later in the day. After a morning of relative calm, police fired pepper spray pellets on demonstrators and arrested at least 180 people.

Out of the 50 members on the Hang Seng Index, 32 dropped, 17 rose and one was unchanged. Among the biggest declines, CK Infrastructure Holdings slid 3.3 per cent to HK$40 and Power Assets Holdings lost 3.2 per cent to HK$42.95.

CAR Inc rallied 1.2 per cent to HK$1.75 after Luckin Coffee, which will be delisted from the Nasdaq for fabricating sales, surged 53 per cent for the biggest gain on record in overnight trading. The two companies are controlled by the same shareholder.

In the mainland, Anhui Jianghuai Automobile Group surged by the 10 per cent daily cap to 7.62 yuan. Volkswagen is in final talks to buy a 50 per cent stake in the listed unit’s parent Anhui Jianghuai Automobile Group Holding for at least 3.5 billion yuan (US$491 million) – its biggest acquisition in China, Reuters reported, citing unnamed sources.

Suofeiya Home Collection added 5.3 per cent to 24.40 yuan – the highest close in 13 months in Shenzhen. Foreign ownership in the furniture maker reached 26.22 per cent on Monday and is approaching the ceiling of 28 per cent imposed by the regulator.

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