Suffice to say Chinese shares did not digest the Huawei Technologies news well.
For every nebulous remark from Donald Trump about how bad China “wants to make a deal” and about how he hopes he isn’t forced to slap more tariffs on his “very good friend” Xi Jinping, there’s an offsetting piece of more concrete news that suggests we’re a long way from a negotiated trade settlement between Washington and Beijing.
Last weekend, for instance, Mike Pence torpedoed sentiment with his performance at the Asia-Pacific Economic Cooperation summit in Papua New Guinea, where he effectively served notice that when it comes to economic development and trade, nations will soon be forced to choose between the U.S. and China.
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Given how fragile sentiment is ahead of the G20, it comes as no surprise that Chinese equities dove following reports that the U.S. government is engaged in an apparently aggressive lobbying effort to convince allies not to use telecom equipment from China’s Huawei Technologies.
That report, out in the Wall Street Journal on Thursday evening, sent mainland equities tumbling on Friday. The SHCOMP logged its worst loss since October 18 and its second decline of >2% this week. The benchmark has fallen 2% or more in seven sessions since October 8.
The ChiNext was dusted, falling 3.4% for its worst day in quite a while.
(Bloomberg)
And telecoms didn’t hold up well under the weight of the Huawei story. Just ask Dr. Peng Telecom & Media Group, which tumbled nearly 7% on the session.
(Bloomberg)
All in all, this marks a rather inauspicious close to the week ahead of the G20 and you can be absolutely sure that Beijing is not amused with the Huawei influence campaign.
On the bright side for investors, the worse the trade tensions get, the more inclined China will be to roll out more RRR cuts and pull all the myriad policy easing (both monetary and fiscal) levers at their disposal.
So the US still has allies left and they follow the advice of the current US president ? Another two years of a Trump presidency and there may be no allies left at all. Even if the next president manages to rebuilt some of the chaos currently being created, I am afraid there will be lasting damage. “The elected once an republican idiot, they might well do it again” will last a long time. And who will be laughing then ? You guess it, our Chinese friends.
The United States will have allies on our side of the Moron Curtain: Brazil, The Philippines, Poland, Hungary, a few Central American fellow banana Republics.
Add all those economies together and you wouldn’t get the GDP of even one small Chinese industrial park. I guess you could add Russia (Putin’s private Mafia), North Korea (Rocket Man’s slave colony), and Saudi Arabia (a princes’s private killing field) to the list of allies.
When you call Canada a security threat, it means there are no sane allies left.