HSI Dives On Trade, Political Tensions

Local and regional markets took a beating on Monday as concerns escalated about a trade war between China and the United States, a slump in the yuan and the worsening anti-extradition crisis here in Hong Kong.

The Hang Seng Index slumped to its lowest level in seven months on a heavy selloff, losing almost 3 percent to close at 26,151.

Almost all 50 blue chips ended lower as many businesses were disrupted amid a general strike called for government critics.

Sun Hung Kai Properties and CK Asset each tumbled more than 5 percent.

Cathay Pacific dropped more than 4 percent as hundreds of flights were disrupted.

Other regional reports were not spared.

On the mainland, the blue-chip CSI300 index slumped 1.9 percent. The Shanghai Composite Index dropped 1.6 percent.

Japan's Nikkei Index fell 1.7 percent. South Korea tumbled 2.6 percent amid a trade row between Seoul and Tokyo. Singapore slipped 1.9 percent and Taiwan fell more than 1 percent.

Dealers say sentiment was affected because of sharp drop in the value of the yuan, days after US President Donald Trump's vow to impose fresh tariffs on goods from China.

Trump's announcement, which came on Thursday, means virtually all of the US$660 billion in annual merchandise trade between the world's two biggest economies will be subject to punitive tariffs, with the latest duties due to take effect September 1.

The yuan dropped to its lowest level to the US dollar since August 2010, fuelling speculation that Beijing was devaluing its currency to support exporters and offset Trump's latest threat to hit US$300 billion in Chinese goods with 10 percent tariffs.

"China is likely to drag out their response and retaliate in many ways against the US trade measures," warned Edward Moya, senior market analyst at OANDA.

Negotiators from both nations are expected to reconvene in Washington in early September for another round of talks after last week's discussions in Shanghai, but investors remain nervous, Moya said.

"Financial markets are still working on pricing in a complete collapse of trade talks amongst the Chinese and Americans," he said. (additional reporting by AFP)