China’s main stock index that tracks technology and other new economy firms fell to its lowest in three and a half years on Thursday, one day ahead of a deadline for the imposition of US tariffs that would target China’s technology and other exports.
The Shenzhen Component Index, home to more than 2,000 stocks in sectors from technology to consumer goods, fell 1.9 per cent to close at 8,862.18, the lowest level since November 2014. The ChiNext Price Index, which tracks 100 companies in faster growing sectors that are key to China’s future economic growth, lost 2.1 per cent to 1,532.68.
“The US tariffs, coupled with a falling yuan, will significantly increase the cost for many Chinese technology companies that rely on imported raw materials, such as semiconductors, integrated circuits and electric components,” said Zhang Xia, an analyst for China Merchants Bank Securities.
Starting on Friday, the US will impose 25 per cent tariffs on 818 Chinese products, which are worth US$34 billion a year. The goods range from cars, robotics and machinery to information and communication products. A second round of tariffs targeting 284 Chinese products worth US$16 billion could come later this summer.
The Shanghai Composite Index also felt the heat, though it fared a little better because it is dominated by state-owned companies in so-called old economy sectors such as energy and financials. It briefly rose after the opening before closing the day lower by 0.9 per cent at 2,733.88, a 28-month low.
In Shenzhen, electronics component makers XDC Industries and Shenzhen Fluence Technology plunged by the daily allowed maximum of 10 per cent to 20.22 yuan and 23.86 yuan respectively. Hunan Goke Microelectronics sank 6.5 per cent to 59.86 yuan.
Industrial metals also fell sharply, as investors worried that the trade tensions will hit economic growth and dampen the demand for metals, said Lu Jin, an analyst for China Construction Bank Futures. “Risks about the economic outlook are rising sharply,” Lu said.
China Molybdenum and Aluminum Corporation of China lost 6.8 per cent and 5 per cent respectively to 5.63 yuan and 3.46 yuan.
Telecoms shares BizConf Telecom and ZTE dropped 10 per cent and 5.8 per cent respectively to 26.09 and 13.00 yuan.
In Hong Kong, the Hang Seng Index dropped as much as 411 points to a nine-month intraday low of 27,830.75, but recovered some ground to finish at 28,182.09, down 0.2 per cent. The Hang Seng China Enterprises Index, known as the H-share index, shed 1 per cent to end at 10,608.06.
Camera module maker Q Technology (Group) tumbled 8.3 per cent to HK$5.06. Hua Hong Semiconductor erased 1.6 per cent to HK$24.30. Copper miner Jiangxi Copper dropped 2.6 per cent to HK$9.29.