Dhaka, Bangladesh
Asian markets tumble

Asian markets tumble

Business Desk Shares across Asia plunged Thursday, with technology firms in Hong Kong and Shanghai battered after the arrest of a top executive at Chinese telecoms giant Huawei that has also fuelled fears about the recent China-US trade deal. As Donald Trump and Xi Jinping's tariffs ceasefire last weekend - which sparked a one-day rally - fades to a distant memory, investors are back in selling mood as they fret over a range of issues including the state of the world economy, oil prices and Brexit. The chances of trade peace between the US and China took a blow Thursday as it emerged Huawei chief financial officer Meng Wanzhou had been held in Canada and faces extradition to the United States over alleged Iran sanctions breaches by the firm. Meng is also the daughter of company founder Ren Zhengfei, a former Chinese People's Liberation Army engineer. The company had been investigated by US intelligence, who deemed it a national security threat. However, the arrest drew a swift response from China, which said it "firmly opposes and strongly protests" the move, adding it had urged Canada and the US to "immediately correct the wrongdoing". The news sent shudders through Hong Kong and Shanghai markets, where tech firms were hammered. Hong Kong-listed ZTE, which was subject to a US banning order earlier his year over security fears before that was reduced to a massive fine, was almost five percent down. Market heavyweight Tencent was two percent lower and AAC Technologies was five percent off. And in Shanghai, Wingtech Technology was four percent down, Raisecome Technology sank 2.8 percent and Fujian Raynen Technology lost 2.6 percent. Taipei-listed tech firms were also hurt. Taiwan Semiconductor Manufacturing Company lost 2.2 percent and Hong Hai Precision was 2.7 percent lower. There were also losses for other tech firms in the region, with Sony down three percent in Tokyo and Samsung almost two percent lower. The sector was already under pressure from concerns about future growth and following a surge in recent years. "This headline is quite significant as the US government is attempting to persuade allies to stop using Huawei equipment due to security fears," said Stephen Innes, head of Asia-Pacific trade at OANDA. "Recall that over 100 Chinese companies traded limit down (last month) when news broke the US urged allies to blacklist Huawei?" On broader markets Hong Kong was down more than two percent while Shanghai lost more than one percent and Tokyo shed 1.8 percent by the break. Taipei was two percent off, while Manila and Jakarta also took a hit. Sydney fell 0.5 percent, Singapore gave up 1.2 percent and Seoul was one percent lower. "This is what you call playing hard ball," said Michael Every, head of Asia financial markets research at Rabobank in Hong Kong. "China is already asking for her release, as can be expected, but if the charges are serious, don't expect the US to blink." Oil prices extended losses ahead of the weekend's meeting of OPEC and non-OPEC production giants, with investors unsure about how much and for how long they plan to reduce output. The commodity has come under selling pressure, having soared Monday and Tuesday, owing to uncertainty about the reduction plans while Trump has called on OPEC to lift output to keep prices low. Tokyo stocks dropped sharply Thursday on renewed worries about tense US-China ties following the arrest of a top Huawei executive in Canada after an American request. The benchmark Nikkei 225 index lost 1.91 percent or 417.71 points at 21,501.62, while the broader Topix index fell 1.82 percent or 29.89 points at 1,610.60. "The Tokyo market is seen trading in a narrow range without a sense of direction," Yoshihiro Ito, chief strategist at Okasan Online Securities, said in a commentary. For the Tokyo market to regain upward momentum, investors will need to see signs that US rate hikes will soon come to an end, said Masayuki Kubota, chief strategist at Rakuten Securities. The dollar fetched 113.06 yen in early Asian trade, against 113.47 yen in London and 113.00 yen in Tokyo late Wednesday. In Tokyo, Takeda Pharmaceutical was down 2.78 percent at 4,122 yen after its shareholders agreed to a $60-billion takeover of Irish pharmaceuticals firm Shire. Game giant Nintendo was down 2.61 percent at 32,410 yen, Sony was down 0.92 percent at 5,880 yen, and Panasonic was off 1.21 percent at 1,138 yen. But some oil-linked shares rallied following two days of losses, with oil developer Inpex edging up 0.66 percent to 1,213.5 yen and oil distributer Showa Shell Sekiyu up 1.42 percent at 1,711 yen. JPMorgan Chase & Co's (JPM.N) trading desk was not buying what U.S. President Donald Trump was selling this week. On Tuesday, major stock indexes plummeted more than 3 percent on renewed fears of a trade war with China - just days after Trump tweeted, following a steak dinner with Chinese President Xi Jinping, that "Relations with China have taken a BIG leap forward!" "It doesn't seem like anything was actually agreed to at the dinner," JPMorgan wrote in a note to clients later that day, adding that Trump's tweets "seem if not completely fabricated then grossly exaggerated." The mistrust from the bank's trading desk highlights a broader dilemma for Wall Street investors: how seriously to take comments from the White House. On one hand, traders have long known that President Trump's bold pronouncements do not always hold, ultimately muting their effect on securities. On the other hand, market volatility has picked up in 2018, in part because of confusion over comments by Washington officials, making them harder to ignore. "It's a judgment call about which announcements should be taken seriously," said Maria Vassalou, portfolio manager for Perella Weinberg Partners' $685 million global macro strategy. "This situation certainly creates unnecessary volatility and complications to the investment process." It is not just Trump. Unexpected comments from White House officials such as Treasury Secretary Steven Mnuchin and economic adviser Larry Kudlow have caused a stir with traders. Each man was cited by Reuters as a driver of market moves more than two dozen times. Mnuchin sent the U.S. dollar to a three-year low in late January after comments at the World Economic Forum in Davos suggesting that a weaker currency was "good for us." Within hours, Trump appeared to contradict him, saying he ultimately wanted a strong dollar, lifting the greenback. As for Kudlow, on April 4 he told reporters that it was possible the U.S. tariffs on Chinese industrial products might never go into effect and may be simply a negotiating tactic. Stocks rose after the remarks, which an unnamed White House official later told Reuters were meant to reassure markets. Yet equity futures fell the next day after Trump said in a statement that he had instructed U.S. trade officials to consider tariffs on an additional $100 billion worth of imports from China to punish them for retaliating against earlier announced tariffs. Some investors have taken protection from White House-fueled volatility into their own hands. World stocks shrivel as trade truce doubts creep in Juan Gomez, head of hedge fund firm Black Swan Quantitative Advisors which manages $75 million in assets, said he has adjusted his options-focused models over the last two years to incorporate more protection against market volatility, partially in response to Trump administration comments. "At this point you are expecting controversial headlines," Gomez said. "At the beginning, it drove me crazy, but now it's just part of what to expect." Katina Stefanova, head of Marto Capital LP which manages approximately $300 million, said her hedge fund firm had created a "Trumponomics" index of securities to help hedge the broader portfolio. Stefanova said her fund's profit this year - up about 7 percent in 2018 through November - would be around two percentage points lower without the index, which has recently focused on impacts of U.S. trade wars, such as Chinese technology stocks, U.S. industrial companies and Asian currencies. "You still have to take the White House very seriously," Stefanova said. "Inconsistency itself swings markets and affects sentiment." Other investors simply try to look past White House headlines. Daniel Lowen, chairman of Quantedge Capital USA Inc, said his approximately $1.5 billion hedge fund firm's algorithms do not try to anticipate market movements from Trump administration pronouncements. "We make no attempt to interpret what we read in the news as input to our investment decisions," Lowen said. The head of equities at a multi-billion-dollar hedge fund manager, who requested anonymity in order to speak with the media, said Trump's comments are "impossible to ignore" but the firm avoids reactive trading even if it can hurt in the short term. "We try and actually isolate our returns from market risk," the person said. Whatever the reaction, professional investors said the White House's effect on markets is hard to avoid. Securities are virtually certain to continue moving on statements related to U.S. trade policy, interest rate changes and other economic issues. The CBOE Volatility Index, or VIX .VIX, a common measure of perceived fear in the markets, is up nearly 90 percent this year. "Maybe some people are good at parsing their words and figuring out what's what, but that's very difficult," said Fritz Folts, chief investment strategist, 3EDGE Asset Management LP, which oversees approximately $800 million. "You have to look at what they do and not what they say." (Inputs taken from agencies)

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