Beijing: The recent America-China tensions have caused a tumbling of Asian markets in the last couple of weeks. This aggravated on Friday, when the US lawmakers insisted on a new economic stimulus, all along with the crisis created by the pandemic.
US-China tensions started to signify on economy when US President Mr. Donald Trump signed an executive order, barring US residents from doing any business with the Chinese parent companies of social media platforms TikTok and WeChat. Mr. Trump quoted ‘national security concerns’ for a reason.
The move, which comes into force in 45 days, is the latest salvo in a tech stand-off between the superpowers and adds to a laundry list of issues they have butted heads over in recent months, including Hong Kong, Huawei and the corona virus.
Tencent, the parent company of WeChat dropped 10 per cent in Hong Kong, while the city’s Hang Seng Index too dropped. The Chinese currency Yuan also had to face a hit against the dollar. “The US government is expected to follow up with more measures targeting Tencent,” Steven Leung, at UOB Kay Hian (Hong Kong), said.
“Tencent’s overseas expansion map now looks a bit uncertain, since some M&A deals, especially if its targets are based in the US, will face challenges.”
The move rippled around Asian markets, with investors concerned about increasingly bitter relations between the economic titans that some fear could lead to a renewal of their painful trade war.
The news also overshadowed data showing a surprise jump in Chinese exports for July.
Hong Kong and Shanghai dropped more than one per cent, while Tokyo finished 0.4 per cent lower. Wellington and Jakarta gave up one per cent, while Sydney, Mumbai, Taipei, Singapore, Manila and Bangkok were also in the red. These are the backbones of Asian markets.
“Apart from the obvious fallout to Tencent and ByteDance, Washington DC’s moves are sure to ratchet up geopolitical tensions with Beijing once again,” said OANDA’s Jeffrey Halley.
Meanwhile, a group of regulators working for Mr Trump suggested stock exchanges impose stricter rules on firms to open up their audit papers to US accountants, which could lead to the delisting of Chinese companies.
In Washington, the bipartisanship that passed a multi-trillion-dollar rescue package earlier this year has given way to the familiar Capitol Hill wrangling as Democrats and Republicans refuse to budge on key issues.
With the Democrats’ $3.5 trillion proposal more than three times the size of the Republicans’ offer, a deal appears a distant hope, despite a Friday deadline. “There are a lot of issues we are close to a compromise position on,” Treasury Secretary Steven Mnuchin said after holding talks with House Speaker Nancy Pelosi and Senate Democratic leader Chuck Schumer. However, he added they were “very, very far apart on some significant issues.”
“In an election year, it is crazy to think that politicians will take a fabulously frugal approach as penniless parenting is rampant across the nation given the services sector beatdown and loss of jobs” because of the virus, said AxiCorp’s Stephen Innes.
Mr Trump has said if an agreement is not found, he will pass an executive order covering a payroll tax cut, eviction protections, unemployment benefits and student loan repayments.
To a slight relief, the statistics on Thursday reveal that the applications for ‘jobless-benefits’ have fallen down. Still, the figure 1.2 million applications remind that there is nothing hopeful in the economy.