China and HK shares slump, tech leads losses after Huawei CFO arrest

Mae Love
December 6, 2018

Sabrina Meng Wanzhou, the CFO of Huawei, was arrested for allegedly attempting to evade newly-implemented United States sanctions. U.S. oil tumbled more than 2% as OPEC and its allies debate at a major meeting in Vienna whether to enact a supply cut aimed at balancing the market.

The end of iPhone sales growth is a major factor here-Apple was this year displaced as the world's second-biggest smartphone producer by, you guessed it, Huawei-but again the trade war is lurking in the periphery. That further shook markets on Thursday, a contrast from the start of the week when investors were in a buoyant mood on eased tensions.

The Globe and Mail newspaper, citing law enforcement sources, said she is suspected of trying to evade USA curbs on trade with Iran. "U.S. President Donald Trump should rein in the hostile activities of some Americans who may imperil Sino-U.S. relations".

In the Meng case, the timing and details of the arrest indicated the move was political, according to Sun Yun, director of the China programme at U.S. think tank the Stimson Centre. The drop brings the Dow's 2-day losses to 1,500 points. President Trump has agreed to postpone planned tariff hikes on Chinese goods, while China has pledged to purchase a "very substantial" amount of American produce and curb the export of deadly opioid Fentanyl to the USA in exchange.

Eric Harwit, an Asian studies professor at the University of Hawaii at Manoa who has written extensively on Chinese telecoms, said the arrest was not just about sanctions violations but the bigger picture of the United States worrying about Chinese hi-tech firms becoming rivals to American companies in the future.

Sterling: US$1.2704, down 0.24%. Nasdaq futures are plunging 2.3%.

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By 0933 GMT, the pan-regional STOXX 600 .STOXX index had fallen 1.8 percent to its lowest level since December 2016. Hong Kong's Hang Seng .HSI dropped 2.1 percent while Shanghai shares .SSEC dropped 0.9 percent. Japan's Nikkei 225 was down 1.9%. But the mood has quickly soured on scepticism that the two sides can reach a substantive deal on a host of highly divisive issues within the tight 90-day timeframe set out.

China demanded her immediate release, and a former Canadian envoy to China warned the case might lead to retaliation by the Chinese against American and Canadian executives. "That could include tit for tat moves against Canadians", he said.

"Recently, our corporate CFO, Ms. Meng Wanzhou, was provisionally detained by the Canadian Authorities on behalf of the United States of America, which seeks the extradition of Ms. Meng Wanzhou to face unspecified charges in the Eastern District of NY, when she was transferring flights in Canada."The company has been provided very little information regarding the charges and is not aware of any wrongdoing by Ms. Meng".

Markets were closed Wednesday for a federal holiday in honor of the late President George H.W. Bush. Brent crude, used to price worldwide oils, dropped 99 cents to $60.57 per barrel.

Brent crude, the worldwide benchmark, tumbled 4.3%, while US-centric WTI crude is off 4.2%.

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