The major Asia Pacific stock indexes plunged on Friday as sentiment across the region dropped in response to the diplomatic spat between China and the United States.
Tensions between the two economic powerhouses rose to the forefront after China’s Foreign Ministry announced Friday that it is revoking the license for the U.S. consulate general in the southwestern Chinese city of Chengdu. The ministry also ordered the consulate general to cease operations, according to an online statement.
“The current situation between China and the U.S. is something the Chinese side does not want to see,” the foreign ministry said in an online Chinese-language statement, according to a CNBC translation.
“The responsibility lies entirely with the U.S. side,” the statement added. “We again urge the U.S. side to immediately revoke its relevant wrong decisions, to create necessary conditions for the two countries’ relationship to return to normal.”
When contacted by CNBC, the U.S. Embassy in Beijing declined to comment on the Chengdu consulate.
The announcement comes after the U.S. ordered China to close its consulate in Houston. U.S. State Department spokesperson Morgan Ortagus said the directive to close China’s consulate general in Houston was made to protect American intellectual property and the private information of its citizens. Beijing had condemned the decision and warned of firm countermeasures.
On Friday, Hong Kong’s Hang Seng Index finished at 24705.33, down 557.67 or -2.21% and South Korea’s KOSPI Index closed at 2200.44, down 15.75 or -0.71%. Markets in Japan were closed for a holiday.
In China, the benchmark Shanghai Index settled at 3196.77, down 128.34 or -3.86% and in Australia, the S&P/ASX 200 finished at 6024.00, down 70.50 or -1.16%.
Hong Kong Stocks End Week Lower as Sino-US Tensions Escalate
Hong Kong stocks also fell on Friday to close the week lower as escalating tensions between China and the United States assuaged optimism about a swift post-pandemic economic rebound.
China ordered the Unites States to close its consulate in Chengdu, while U.S. Secretary of State Mike Pompeo also took aim at China, calling for Washington and its allies to use “more creative and assertive ways” to press the Chinese Communist Party to change its ways.
Shares in Hong Kong weakened because another escalation in tensions in the Sino-U.S. relationship is extremely unfavorable to economic recovery under the impact of the pandemic. Furthermore, traders will continue to monitor the situation as an escalation could have an adverse effect on the implementation of the Phase 1 trade deal between the two economic powerhouses.
At the close, China’s A-shares were trading at a premium of 31.52% over Hong Kong-listed H-shares.
Australian Shares Fall, Wiping Out Week’s Gains
Australian shares closed lower on Friday, led by tech stocks, wiping out a week’s worth of gains in the process. The main catalyst behind the sell-off was a steep break on Wall Street, while another surge in COVID-19 cases added to the negative vibe. Shares were also pressured by deteriorating relations between the United States and China, Australia’s major trading partner.
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