Hang Seng Tech Index Plunges Up to 3.9% Amid Signs of US-China Trade Tensions

US Authorities Take Sanctions Including Revoking China Telecom's US License
Chinese Tech Stocks Weaken Amid Rising Trade Tensions

[Image source=EPA Yonhap News]

[Asia Economy Reporter Kim Suhwan] Foreign investors are reportedly selling off Chinese tech stocks amid signs of escalating US-China trade tensions.

According to Bloomberg on the 27th, the Hang Seng Tech Index, which tracks major Chinese technology companies, fell by as much as 3.9% that day.

This marks the largest decline in one month.

Another major index, the CSI 300 Index, also dropped by about 1.5%, while the Hang Seng Index fell by 1.9%.

The decline in Chinese tech stocks came immediately after the stock prices of Chinese companies listed on the US stock market fell the previous day.

The Nasdaq Golden Dragon China Index, which tracks Chinese companies listed on the Nasdaq, plunged 4% in one day, marking the largest drop in a month.

Earlier, Chinese tech stocks had already been hit by increased regulatory pressure from the government since the beginning of the year.

The Hang Seng Tech Index has fallen nearly 5% just this week, plunging up to 40% from its peak in February.

Amid this, there is analysis that the stock prices were affected by signs of the US government strengthening sanctions against China.

The US Federal Communications Commission (FCC) took action the day before to revoke the US business license of China Telecom, China's largest wired telecommunications operator and the third-largest mobile carrier.

A strategist at IG Asia said in an interview with Bloomberg on the same day, "The revocation of China Telecom's business license is diluting the initial expectations that relations between the US and China would improve."

He added, "This move has led to speculation that the US may impose additional sanctions on Chinese tech companies, similar to the past Huawei case."

Alongside this, US Secretary of State Antony Blinken issued a statement urging all UN member states, saying, "The United States strongly supports Taiwan's participation in the UN system and seeks the support of other UN member states," calling for support for Taiwan's re-entry into the UN.

From the Chinese government's standpoint, which emphasizes the 'One China' principle aimed ultimately at unification with Taiwan, such public support from US diplomatic authorities for Taiwan's re-entry into the UN inevitably places considerable pressure on China.

With the Chinese government's regulatory tightening already weighing on tech stocks, and signals of renewed US-China conflict emerging, the prevailing view in the market is that Chinese tech stocks will remain weak for the time being.

Caster Peng, a researcher at Core Pacific Yamaichi International, said that investor confidence in Chinese tech stocks has not fully recovered, adding, "They are selling stocks whenever any negative news comes out."