HSI Falls Over China-US Tension, Covid Surge

Hong Kong stocks finished Tuesday's morning session with big losses, hit by China-US tensions as well as concerns over new outbreaks in the city and elsewhere around the world.

The Hang Seng Index fell 1.7 percent, to 25,335.

On the mainland, the Shanghai Composite Index fell 1.1 percent to 3,405, while the Shenzhen Composite Index lost 1.4 percent, to 2,296.

Tokyo lost 0.8 percent. Sydney fell 0.7 percent and Seoul was off 0.5 percent with Taipei 0.1 percent lower, though Wellington and Jakarta edged up.

Singapore was 0.2 percent down after figures showed the city state's trade-dependent economy plunged into recession for the first time in a decade as it contracted a record 41.2 percent on-quarter in April-June and 12.6 percent on-year.

The worse-than-expected figures will also ring alarm bells for Asia's many trade-dependent economies as Singapore is typically hit first before ripples spread across the region.

"There is a risk that the divergence between a gloomy economic outlook and unexpectedly strong returns from equity markets is reconciled by some pull-back in asset prices rather than a surge in economic optimism," said Chris Iggo, at AXA Investment Managers. "There is a case for caution."

Geopolitical tensions were also back on the table after US Secretary of State Mike Pompeo called China's pursuit of resources in the South China Sea "unlawful", ramping up support for Southeast Asian nations and triggering an angry response from Beijing.

The comments added to a laundry list of issues that have the two economic superpowers at odds, including China's role in the pandemic outbreak, trade, Hong Kong and Huawei.

"The US relationship with China and jobs and law-and-order form the troika of issues that will serve as the primary platform for President Trump's re-election campaign," said Stephen Innes at AxiCorp.

"Growing US-China tensions are now a daily breakfast staple and will likely remain so into the November election." (AFP)

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