Asia Mixed With Eyes on US-China Tensions Over Hong Kong

Asian markets continued to ignore risk rally in US and trade mixed today. Sentiments are mildly weighed down by US-China tensions over Hong Kong. But reactions are so far limited. Euro and Dollar are mildly firmer in Asian session but major pairs and crosses are staying inside yesterday’s range. For the week, commodity currencies are the strongest ones so far, led by Canadians. Yen, Dollar, and Swiss Franc are the worst on over-optimism on economy reopening and coronavirus treatments.

In Asia, currently, Nikkei is up 1.97%. Hong Kong HSI is down -1.24%. China Shanghai SSE is down -0.07%. Singapore Strait Times is down -0.17%. Japan 10-year JGB yield is down -0.0023 at 0. Overnight, DOW rose 2.21%. S&P 500 rose 1.48%. NASDAQ rose 0.77%. 10-year yield dropped -0.018 to 0.680.

HSI, Yuan down as Pompeo said HK no longer warrants special treatment

Hong Kong stocks tumble notably in Asian session today while off-shore Chinese Yuan also breached to a new low. US-China tensions intensified further over the proposed national security law for Hong Kong. (More details regarding the laws here). US Secretary of State Mike Pompeo told Congress on Wednesday that Hong Kong no longer qualifies for its special status as China has undermined the city’s autonomy so fundamentally.

Pompeo said China’s plan on the national security legislation was “only the latest in a series of actions that fundamentally undermine Hong Kong’s autonomy and freedoms… No reasonable person can assert today that Hong Kong maintains a high degree of autonomy from China, given facts on the ground. He certified to the Congress that Hong Kong no longer warrants treatment under U.S. laws “in the same manner as U.S. laws were applied to Hong Kong before July 1997.” “It is now clear that China is modeling Hong Kong after itself,” he added.

Separately, US also requested an emergency UN meeting over issue. Washington’s UN mission staid in a statement, that China’s proposal will “fundamentally undermine Hong Kong’s high degree of autonomy and freedoms as guaranteed under the Sino-British Joint Declaration of 1984, which was registered with the UN as a legally binding treaty… This is a matter of urgent global concern that implicates international peace and security.” However, it said that China has “refused to allow this virtual meeting to proceed”. “This is another example of the Chinese Communist Party’s fear of transparency and international accountability for its actions,” the US statement said.

China’s ambassador to the UN Zhang Jun just tweeted “Legislation on national security for Hong Kong is purely China’s internal affairs. It has nothing to do with the mandate of the Security Council.”

Despite today’s selloff, Hong Kong HSI is holding above this week’s low at 22519 so far. Technically, corrective rebound from 21139.26 should have completed at 24855.47 after rejection by 55 day EMA, and further decline is expected to retest this low. Nevertheless, break of 22519 support needs to happen first.