Asia report: Markets lower as Hong Kong tensions continue

Most markets in Asia finished lower on Monday, with Hong Kong’s benchmark index turning in a significant drop, as that part of the region grappled with a general strike amid ongoing political protest.

In Japan, the Nikkei 225 was down 1.74% at 20,720.29, as the yen strengthened 0.44% against the dollar to last trade at JPY 106.12.

Of the major components on the benchmark index, automation specialist Fanuc was down 2.49%, fashion firm Fast Retailing lost 1.07%, and technology conglomerate SoftBank Group was 3.48% weaker.

The broader Topix index was retreated 1.8% in Tokyo, to end its trading day at 1,505.88.

On the mainland, the Shanghai Composite was 1.62% weaker at 2,821.50, and the smaller, technology-heavy Shenzhen Composite was 1.47% lower at 1,517.27.

In fresh data out of China, the unofficial Caixin services purchasing managers’ index came in at a five-month low, at 51.6 for July, compared to the 52.0 reported for June.

It showed the sector was still in expansion mode, however, as the reading remained above the 50.0 waterline that separates expansion from contraction.

South Korea’s Kospi lost 2.56% to 1,946.98, while the Hang Seng Index in Hong Kong was off 2.85% at 26,151.32.

Political unrest turned into a general strike in the special administrative region on Monday, as Hong Kong’s chief executive Carrie Lam said the city was on the brink of “a very dangerous situation”.

The unrest began with protests in early June, as locals voiced their disapproval of an extradition bill designed to allow authorities in Beijing the right to extradite citizens in Hong Kong back to the mainland.

Those opposing the bill say it jeopardises the region’s supposed autonomy.

The ongoing protests and general strike led to the cancellation of more than 100 flights at Hong Kong’s hub airport, leading to a 4.2% fall in shares of airline Cathay Pacific.

Over on the Korean peninsula, the blue-chip technology stocks were weaker in Seoul, with Samsung Electronics down 0.22% and chipmaker SK Hynix falling 0.92%.

Steel manufacturers were also in the red, with Hyundai Steel off 3.84% and Posco down 3.23%.

Officials in Seoul confirmed plans to invest around KRW 7.8trn into research and development on Monday, in a bid to encourage local production of equipment and materials that many firms currently import from Japan.

It came as Tokyo removed South Korea from its ‘white list’ of countries that enjoy preferential export treatment last week, amid an ongoing diplomatic spat between the neighbouring nations.

Sentiment began weaker in the wider region as well, as consternation over Washington’s latest moves on trade continued.

Donald Trump’s administration surprised markets by slapping a 10% tariff on another $300bn worth of Chinese goods from 1 September, it emerged last Thursday.

“The yuan weakened past the psychological level of 7.00 against the US dollar, as the Chinese services PMI came in worse-than-expected in July, but the composite PMI improved from 50.6 to 50.9 on stronger manufacturing activity,” said London Capital Group senior market analyst Ipek Ozkardeskaya.

“The People’s Bank of China said the move was normal and that it has the means to stabilise the foreign exchange fluctuations.”

Oil prices were lower as the region went to bed, with Brent crude last down 1.28% at $61.11 per barrel, and West Texas Intermediate falling 1.22% to $54.99.

In Australia, the S&P/ASX 200 fell 1.9% to settle at 6,640.30, while across the Tasman Sea, New Zealand’s S&P/NZX 50 was 0.9% softer at 10,766.03.

Both of the down under dollars were weaker on the greenback, with the Aussie last off 0.48% at AUD 1.4777, and the Kiwi retreating 0.21% to NZD 1.5331.