Trade woes and economic slowdown weigh on Asian stocks

Asian stocks

Asian stocks fell on Thursday as trade data from China showed a continued weakness in the world’s second-largest economy, while technology shares were hit by the prospect of more U.S. curbs on Chinese firms after a dispute over chip technology.

Asian stocks

China’s trade data disappoints as recovery falters

China’s imports and exports shrank at a slower-than-expected pace in August, but they still remained close to historic lows, as businesses grappled with sluggish domestic and overseas demand. China’s trade surplus also shrank more than expected to a two-month low, as relatively steady imports offset dwindling exports.

The data added to the worries over China’s economic recovery, which has been losing momentum amid a resurgence of COVID-19 cases, regulatory crackdowns on various sectors, and power shortages. Analysts expect China’s growth to slow further in the second half of the year, putting pressure on policymakers to ease monetary and fiscal policies.

China is a key driver of global growth and trade, and its slowdown has implications for other countries, especially those that rely on its demand for commodities and manufactured goods. Australia, for instance, saw its trade surplus shrink more than expected in July, hitting a 17-month low as commodity exports to China dried up.

Tech shares slump as U.S.-China tensions escalate over chips

Technology shares were among the worst performers in Asia, as they faced a double whammy of weak demand from China and renewed tensions with the U.S. over chip technology.

Apple Inc (NASDAQ: AAPL ) and its Asian suppliers suffered after China ordered government employees to stop using foreign devices, including Apple’s iPhones, ahead of the launch of the new iPhone 15 range. The move was seen as part of China’s efforts to boost its domestic tech industry and reduce its reliance on foreign products.

But the bigger blow came from the suggestions by top Republican lawmakers that the U.S. should end all technology exports to China’s Huawei and Semiconductor Manufacturing International Corp (SMIC) (HK: 0981 ), after the two unveiled new chips that allegedly violated recent trade restrictions.

The lawmakers claimed that SMIC’s new chips, which were featured in Huawei phones, were produced using restricted U.S. technology, and urged the Biden administration to take action against the Chinese firms. The rhetoric could spur more U.S. restrictions on tech exports to China, and could potentially invite retaliatory measures from Beijing, heralding further destabilization in global trade.

Technology-heavy bourses were the worst hit by the news, with Hong Kong’s Hang Seng down 0.9%, while South Korea’s KOSPI shed 0.6%. SMIC was the worst performer on the Hang Seng, down over 6%, while Samsung Electronics Co Ltd (KS: 005930 ), AAC Technologies Holdings Inc (HK: 2018 ), Hon Hai Precision Industry Co Ltd (TW: 2317 ) and Japan Display Inc (TYO: 6740 ) also retreated.

Japan bucks the trend as BOJ signals easy policy stance

Japan was the only major Asian market that managed to limit its losses, as recent comments from Bank of Japan officials suggested that the central bank will maintain its easy monetary policy for the time being.

The BOJ has been lagging behind its peers in tapering its stimulus measures, as Japan’s economy remains fragile amid a slow vaccination rollout and repeated state of emergencies. The BOJ has also been wary of the impact of higher interest rates on Japan’s massive public debt and fragile banking sector.

The Nikkei 225 index edged down 0.2%, outperforming other regional peers. Some sectors, such as utilities and real estate, benefited from the low interest rate environment, while exporters also gained from a weaker yen.

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