Global Markets Overview: Asia
By Chau Tonnu, Analyst at the York IFS Global Market Telegraph
From 22 September to 6 October 2020
After China’s Ping An Insurance Group raised its stake in HSBC, the Hang Seng climbed 1%, but the gains were reversed by Wednesday when the index fell by 0.9% [i]. The Nikkei 225 ended 1.5% down, and remained that way after a system glitch which halted all trading for a day [ii]. Meanwhile. the CSI moved slightly by 0.3% following a tech rally that boosted Wall Street last Friday [iii].
The US- China trade war has taken a new turn as the US Department of Commerce has imposed restrictions on China’s biggest chipmaker, the Semiconductor Manufacturing International Corporation (SMIC). One third of SMIC’s American customers now require a licence to export US chipmaking software to SMIC, after being deemed an ‘unacceptable risk’ of being diverted to ‘military end use' [iv]. The company has already suffered after losing its biggest customer in August — Huawei — that generated 20% of revenue. The announcement led to the company’s share price to fall by 7% on Monday, reaching the lowest in five months [v]. SMIC was the ‘national champion’ for China and played a vital role in the government’s dual circulation plan in creating self-sufficiency after raising $7.6bn for its IPO in July — the biggest the country had seen in 10 years [vi]. Subsequently, the new sanctions have deepened the US-China tech war and more Chinese tech firms fear similar sanctions.
After 13 years, an international arbitration court ruled in favour of Vodafone against Indian tax authorities who demanded €3bn following the acquisition of India’s second largest mobile network company, Hutchison Essar, for £7.1bn. On Friday, Vodafone’s shares sunk 0.7% but Vodafone Idea, its Indian mobile network, rose 12% [vii]. The tax dispute halted Vodafone’s growth plans in India and led to the company pledging to stop investing in the country. Foreign direct investment towards India has also soured following the controversy.
Japanese economic recovery has been much slower than expected, despite the Covid-19 pandemic being relatively controlled in the area. In the second quarter of 2020, GDP shrunk a record of 7.9%. The industry sector has taken a hard hit, with the iron and steel sector reporting an index of -55 whilst the automobile sector showed an index of -61. Although the service sector has recovered slightly with retail up +18, the hotel and restaurant sector have notably reported an index of -87 [viii]. However, the chief cabinet secretary claims that the initiatives have made an impact — including the ‘Go To’ campaign which subsidised travels to Japan. The challenge for the new prime minister is restoring the Japanese economy and paving the way for the Tokyo Olympics next year.
This article was first published in University of York Investment and Finance Society's Global Market Telegraph (GMT) Edition 9.1 in early October 2020.
[i] https://www.scmp.com/business/markets/article/3103277/hong-kong-china-stocks-rise-bright-august-economic-data-and [ii] https://asia.nikkei.com/Announcements/Nikkei-average-closed-at-23-185.12-on-Thursday [iii] https://www.ft.com/content/f189b5b1-1e08-4ff1-9994-f1c89d9c1a79 [iv] https://www.ft.com/content/7325dcea-e327-4054-9b24-7a12a6a2cac6 [v] https://uk.reuters.com/article/us-usa-china-smic/smics-hong-kong-shares-tumble-after-u-s-tightens-export-restrictions-idUSKBN26J018 [vi] https://www.ft.com/content/6f513d88-1aad-4195-889e-d909411da0f4 [vii] https://www.ft.com/content/be5db92a-4cb4-4b3d-8f23-64faf44e6bd0 [viii] https://www.ft.com/content/7bab0e26-1ce2-4723-9057-96f664430652 What do you think? Let us know in the comment section below!
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