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US China Telecom Ban Batters Hong Kong Tech Stocks

The Hang Seng Tech Index lost more than 3% on Wednesday with Tencent, Alibaba, JD.com and XD Inc among those taking a hit

stock market investors
Chinese brokerages have already started cutting jobs because of the bleak business environment. File photo: Reuters.


Hong Kong dragged most of Asia’s markets down with it on Wednesday with tech firms suffering after China Telecom was banned from operating in the United States.

The move was not unexpected but worsened already fraught tensions between the superpowers and with lingering concerns about inflation, the mood on trading floors was downbeat.

A strong corporate earnings season has, though, provided some much-needed support to investors in recent weeks as companies proved resilient in the face of supply snarls, surging commodity and wage costs, and spiking Covid cases.


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But long-running friction between Washington and Beijing continues to cast a dark shadow over trading floors, with the two sides locked in a stand-off over a range of issues including Taiwan, national security, technology, trade and Hong Kong.

On Tuesday, the Federal Communications Commission cancelled the operating licence of China Telecom’s US unit saying it “raised significant national security and law enforcement risks.”

US-listed Chinese tech firms sank, and their stocks in Hong Kong also suffered hefty selling, pulling the Hang Seng Index downwards.

The Hang Seng Index lost 1.57%, or 409.53 points, to 25,628.74. The Shanghai Composite Index shed 0.98%, or 35.33 points, to 3,562.31, while the Shenzhen Composite Index on China’s second exchange sank 1.11%, or 26.88 points, to 2,397.51.

The Hang Seng Tech Index lost more than 3%, with Tencent, Alibaba, JD.com and XD Inc among those taking a hit in morning trade.

The move “seems to dampen previous hopes that the US-China relations may be turning for the better”, Jun Rong Yeap of IG Asia said. It “has raised some doubts as to whether further escalation may bring back more US scrutiny on Chinese technology players.”

Soaring Global Prices

Most of the rest of Asia was also in the red as a forecast-beating jump in Australian core inflation added to broad fears about soaring global prices that are forcing central banks to remove the ultra-loose monetary policies put in place at the start of the pandemic.

With some countries having already lifted interest rates, the United Kingdom is expected to follow suit before the year’s end, while the US Federal Reserve will likely taper its bond-buying programme next month and hike borrowing costs in mid-2022.

Investors are hoping for clues about the European Central Bank’s plans when it holds its latest meeting on Thursday.

Tokyo, Shanghai, Seoul, Wellington, Bangkok, Manila and Jakarta all dropped, though Sydney, Singapore, Taipei and Mumbai rose.

The benchmark Nikkei 225 index inched down 0.03% or 7.77 points to end at 29,098.24, while the broader Topix index slipped 0.23% or 4.59 points to 2,013.81.


Citigroup Profits Warning

Traders were largely unmoved by another record close for the Dow and S&P 500 on Wall Street. However, observers remained upbeat that the global recovery, while slowing, will continue to favour companies’ bottom line. Still, Citigroup warned profit growth could be near its peak.

Oil markets fell but remained around multi-year highs on expectations about surging demand and concern over supplies.

Investors are also keeping tabs on the crisis in China’s property sector with several developers struggling to meet their debt obligations, while industry giant China Evergrande faces a new deadline at the end of the week to avoid a default.

Authorities called on the firm’s tycoon boss Xu Jiayin to dip into his own pocket to ease its financial problems, reports said.

However, with liabilities of more than $300 billion, and his net worth at less than $8 billion, it is unlikely that would make much of a difference.



Tokyo > Nikkei 225: FLAT at 29,098.24 (close)

Hong Kong > Hang Seng Index: DOWN 1.6% at 25,628.74 (close)

Shanghai > Composite: DOWN 1.0% at 3,562.31 (close)

New York > Dow: UP less than 0.1% at 35,756.88 (close)


  • AFP with additional editing by Sean O’Meara


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Sean O'Meara

Sean O'Meara is an Editor at Asia Financial. He has been a newspaper man for more than 30 years, working at local, regional and national titles in the UK as a writer, sub-editor, page designer and print editor. A football, cricket and rugby fan, he has a particular interest in sports finance.


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