Tech rout after Huawei shockerTop News | Agencies and Samantha Wong 7 Dec 2018
Sharp losses in technology shares pulled down benchmark stock indexes in Hong Kong and China yesterday, after a senior executive of tech giant Huawei was arrested in relation to alleged violations of US sanctions.
US equity futures tumbled at the Asia open, sending a shock wave through stock markets and setting the tone for yesterday's trading.
The Hang Seng Index fell 2.5 percent, or 663 points, to 26,081.18. The IT hardware index fell by much as 3 percent, and the subindex for tech firms lost more than 2 percent.
AAC Technologies and Huawei supplier Sunny Optical Technology dropped more than 5 percent, while ZTE slid by at least 5 percent in Hong Kong and in Shenzhen. BYD Electronic lost nearly 6 percent.
Chinese drug stocks fell the most since 2009 as investors worried the government is driving down prices for their products via a centralized procurement program. The MSCI China Health Care Index fell 8.4 percent, with Sino Biopharmaceutical sliding 16 percent.
On the currency market, the yuan weakened to 6.86 against the US dollar.
Meng Wanzhou, one of the vice chairs on Huawei's board and the daughter of company founder Ren Zhengfei, was arrested in Vancouver and is facing extradition to the United States.
Huawei is one of the world's largest makers of handsets and telecommunications network equipment.
The tech rout and renewed trade worries pulled the Shanghai Composite index down 1.4 percent to 2,612.64 points, while the blue-chip CSI300 index fell 1.8 percent. Chinese H-shares listed in Hong Kong fell 3 percent.
"The impact [on the market] is quite big because we just had the President Xi Jinping and US counterpart Donald Trump meeting, and people were expecting a 90-day honeymoon," said Linus Yip, chief strategist at First Shanghai Securities in Hong Kong, referring to Beijing and Washington's agreement last weekend to refrain from adding tariffs on each other in the next couple of months.
While another Chinese tech company, ZTE, fell foul of the US sanction regime, "no arrest was made back then," Yip added, reflecting on the seriousness of the Huawei case.