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Asian markets mostly up but Huawei, trade war loom large

Asian markets mostly up but Huawei, trade war loom large

Business Desk Asian markets mostly rose Tuesday but concerns about the Huawei row and broader China-US trade war kept investors on edge, with analysts warning the crisis could rumble on for some time. Regional investors were spooked by a sharp drop in New York’s tech-rich Nasdaq after Google said it was beginning to sever ties with the Chinese telecoms giant, days after Donald Trump’s decision to bar it from the US market and put it on a sales blacklist. The Huawei development — with the US citing national security concerns —has muddied the waters in the tariffs stand-off between Washington and Beijing, which was thought to have been close to conclusion at the start of the month. And now some observers are warning that stalled talks between the economic superpowers might not see any progress before a hoped-for meeting between Trump and China’s Xi Jinping at the G20 in June. “The market was a little optimistic that a trade deal would just get done here this month,” Brett Ewing, chief market strategist at First Franklin Financial Services, told Bloomberg News. Dealers have “definitely come to terms with a longer term trade negotiation process”. While the Commerce Department issued a 90-day reprieve on the ban on dealing with Huawei, saying breathing space was needed to avoid huge disruption, the two appear to be digging their heels in. And on Monday China’s envoy to the European Union called the Huawei move “wrong behaviour”, adding “there will be a necessary response”. Zhang Ming warned: “Chinese companies’ legitimate rights and interests are being undermined, so the Chinese government will not sit idly by.” The developing crisis had a mixed impact on Asia’s tech firms, with Samsung Electronics, a rival to Huawei in the smartphone market, rallying 2.7 percent. Analysts say the US ban will damage Huawei’s ability to sell phones outside China, offering Samsung a chance to consolidate its position at the top of the global market. But in Tokyo, Sony shed more than four percent and Sharp was off 2.5 percent, while Taiwanese chip giant TSMC shed 1.7 percent. “As trade wars hurt demand in the US and China, Asian electronics manufacturers will feel considerable pain, in our view,” Tieying Ma, an economist at DBS Group, said. After an initial sell-off, Shanghai’s composite index ended more than one percent higher, with some observers concurring with Huawei boss Ren Zhengfei that the firm could absorb the impact of the ban. “The global telecom supply chain can still work perfectly without the US suppliers,” said Sun Jianbo, president of China Vision Capital Management in Beijing. “China and US are unlikely to allow the worst-case scenario, which involves putting up trade barriers on all fronts, as it will mean great losses for both parties. So the worst possible case may have been priced” into markets. Sydney rose 0.4 percent, Seoul added 0.3 percent and Taipei was 0.7 percent higher, with Manila, Mumbai, Bangkok and Jakarta all in positive territory. Tokyo stocks closed lower on Tuesday, tracking losses in global markets as investors fret over the latest flare-up in the China-US trade war involving Chinese tech giant Huawei. The benchmark Nikkei 225 index fell 0.14 percent, or 29.28 points, to 21,272.45, while the Topix index was down 0.30 percent, or 4.62 points, at 1,550.30. “The Tokyo market was hit by aftershocks of the Huawei dispute,” Toshikazu Horiuchi, a broker at IwaiCosmo Securities Co. Ltd, told AFP. Yutaka Masushima, market analyst at Monex, said in a note: “The US market continued its losses on worries over business stopping between US companies and China’s Huawei.” On Wall Street, shares of technology companies fell sharply after Google began to sever ties with Chinese telecoms giant Huawei amid the US-China trade war. In Tokyo, tech firms were largely lower as electronic parts maker Rohm dropped 1.16 percent to 6,760 yen, with chip-making equipment manufacturer Tokyo Electron down 1.87 percent at 15,420 yen. Automakers were mixed as Toyota was down 0.50 percent at 6,494 yen but Honda rose 0.10 percent to 2,832.5 yen. SoftBank Group rallied 3.52 percent to 10,705 yen after the top official at the US communications regulator on Monday announced support for the proposed $26-billion merger between Sprint and T-Mobile. SoftBank owns the majority of Sprint shares. The dollar fetched 110.15 yen in Asian afternoon trade, against 110.04 yen in New York late Monday. Hong Kong dropped 0.5 percent and Wellington closed off 0.2 percent. In early trade London rose 0.3 percent, Paris added 0.2 percent and Frankfurt put on 0.6 percent. “The US-China trade war is in danger of assuming Brexit-like characteristics — long and drawn out with a series of false dawns, but with no discernible progress made after a lot of emotional noise,” said OANDA senior market analyst Jeffrey Halley. On currency markets the pound fell again and remains lodged around four-month lows against the dollar as Prime Minister Theresa May struggles to get opposition Labour backing for her Brexit deal, meaning it is likely to fail on her fourth attempt to pass it through parliament next month. There is growing concern May will step down if she loses again, leaving the path open for a hardliner who is keen for a no-deal divorce, which many experts say will be economically destructive. Australia’s dollar sank 0.6 percent against the greenback after central bank officials hinted at an interest rate cut to record lows when it holds its policy meeting next month. Oil prices rose after major producers said supplies were sufficient and stockpiles still rising, but gains were capped by the China-US tensions. Shares of technology companies fell sharply on Monday in down session for Wall Street after Google began to sever ties with Chinese telecom giant Huawei amid the US-China trade war. The tech-rich Nasdaq Composite Index tumbled 1.5 percent to 7,702.38, with chip companies that do business with Huawei among the hardest hit. The Dow Jones Industrial Average declined 0.3 percent to 25,679.90, while the broad-based S&P 500 fell 0.7 percent to 2,840.23. Google, which makes the Android system used on many smartphones, said it was complying with a US order last week that barred US companies from engaging in telecommunications trade with foreign companies said to threaten American national security, a move targeting Chinese giant Huawei. Shares of Google parent Alphabet shed two percent, while chip companies like Micron Technology, Skyworks Solutions and Qualcomm all fell. The losses added to a dismal stretch for semiconductors, which have lagged the S&P 500 over the last two weeks as the US-China trade war has worsened. The Huawei ban “led to selling in the Chinese giant’s suppliers and partners, since the likes of Intel, Alphabet, Broadcom, and Qualcomm would all register lower revenues should the ban remain in effect,” said a note from Gorilla Trades strategist Ken Berman. Among other companies, Sprint jumped 18.8 percent and T-Mobile 3.9 percent following an announcement that the Federal Communications Commission endorsed a merger of the companies. Shares of both companies pulled back somewhat from peak levels after Bloomberg reported that the Justice Department was likely to oppose the deal. But both companies still ended significantly higher. Ford slipped 0.1 percent after announcing it would cut 7,000 jobs, or 10 percent of its global salaried workforce, as part of a reorganization. (Inputs taken from agencies)

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