Markets Slip by Week's End on Escalating U.S.-China Conflict

China has threatened to retaliate this week after Washington signed bills supporting Hong Kong protesters.

Author: CapitalWatch Staff   

While the stock market plunge in the U.S. was delayed thanks to Thanksgiving, on Friday the sweep came in full force, sending most Chinese ADSs in the red.

This was in response to China's threat of retaliation after U.S. President Donald Trump signed laws on Wednesday backing the Hong Kong protests.

Hong Kong has been in commotion since early June. The movement, which started as a reaction to the proposed extradition bill – under which the city could extradite individuals wanted in China across the border – grew into a half-year opposition to the Hong Kong governance.

As CW columnist Mark Melnicoe wrote in a July commentary, the biggest mass protests in the city displayed the distrust that Hongkongers have for an increasingly authoritarian government in Beijing.

The demonstrators, meanwhile, have been calling on the U.S. for support as they demand a shift to democratic rights. As the New York Times reported earlier this month, activists hope that Washington will save the city, waive American flags and Uncle Sam posters. And finally, after some earlier bipartisan backing, the U.S. has officially replied.

This week, Trump signed two bills – one to carry out an annual assessment of Hong Kong's sovereignty and the other to cut off sales of weaponries to the city's police, according to CNBC.

As expected, Beijing, which warned the U.S. previously to stay out of interfering in the conflict, responded furiously.

"The move is a severe interference in Hong Kong affairs, which are China's internal affairs. It is also in serious violation of the international law and basic norms governing international relations. The Chinese government and the people firmly oppose such stark hegemonic acts," wrote state-run news media Xinhua on Thursday, citing a statement by China's Foreign Ministry.

"We urge the United States not to continue going down the wrong path, or China will take countermeasures and the U.S. must bear all the consequences," the Ministry stated.

Xinhua also wrote, "Hong Kong residents enjoy unprecedented democratic rights in accordance with law."

Xinhua also claimed that Washington aims to "to undermine Hong Kong's stability and prosperity, sabotage the practice of ‘one country, two systems,' and disrupt the Chinese nation's endeavor to realize the great rejuvenation."

Despite a concrete plan of retaliation, the threat sent investor fears soaring and world markets plunging. On Thursday, world markets plunged on investor fears, with U.S. markets to follow on Friday. That was after a four-day lift on stocks to near-record highs, as Reuters wrote, on optimism in trade-deal progress.

The Dow fell 0.40%, or 112.59 points, to close at 28,051.41 on Friday. The S&P 500 also slipped 0.40% to 3,140.98. The Nasdaq Composite was down 0.46%, at 8,665.47.

The slide in Chinese ADSs affected companies across various industries.

Electric automaker Nio Inc. (NYSE: NIO) was among the biggest losers on the day, down nearly 8%, at $2.27 per American depositary share. Another e-vehicle maker, Kandi Technologies Group Inc. (Nasdaq: KNDI), which prepares to launch in the U.S. market, slipped 1% lower, to $4.77 per share. Uxin Ltd. (Nasdaq: UXIN), a used car marketplace which just posted strong results for the third quarter, saw its shares slide 7% to $2.49 apiece.

Some stocks in the financial sector also shifted lower. X Financial (NYSE: XYF) and Jiayin Group Inc. (Nasdaq: JFIN) both closed down 5%, at $1.77 and $7.06 per share, respectively. 9F Inc. (Nasdaq: JFU) slipped 3% to $10.32 per ADS. Shares in Futu Holdings Ltd. (Nasdaq: FUTU) inched 8 cents lower, to $10.45.

E-commerce giant Alibaba Group Holding Ltd. (NYSE: BABA) saw its shares slide 82 cents after on Tuesday it debuted in an $11.2 billion Hong Kong offering – the biggest IPO this year. It closed at $200 per share on the day. Its rival, Inc. (Nasdaq: JD), shifted down nearly 2% in trading, to $32.65 per ADS.

The U.S. is planning to bring the China threats discussion to a NATO summit next week, according to Reuters.