The two-month rally in Hong Kong and mainland China lost steam this week on a report that President Joe Biden was preparing to amend U.S. sanctions against Chinese companies with ties to the nation’s military. The Biden administration is now looking to add new targets to its list of companies it views as a national security threat.
Any relief that investors in Chinese companies with alleged military ties felt after Luokung (Nasdaq: LKCO) and Xiaomi (HKG: 1810); (OTC: XIACF) successfully challenged sanctions against their companies in American courts might just have been temporary. Rather than shrug their shoulders and give up on his predecessor’s attack on these companies, the Biden administration seems not only intent on finding a way to enforce these sanctions, but actively looking for similar Chinese military-friendly stocks to sanction.
The Hang Seng Index dropped 1.1% to 28,996.03 on Thursday, retreating from a three-month high this week following an almost 3% jump over the past two months, while the Shanghai Composite Index ended trading with a 0.4% decline. One of the sanctioned companies, CNOOC (HKG: 0883) fell 2.6% while Tencent Holdings lost 2.1%. CK Infrastructure (KHKG: 1038); (OTC: CKISF) and Geely Automobile (HKG: 0175); (OTC: GELYF) both fell around 2% in Hong Kong.
“Sino-US tensions are unlikely to ease or increase significantly in the near term,” said Bruce Pang, head of macro and strategy research at China Renaissance Securities in Hong Kong, according to the South China Morning Post.
“The likelihood of a materially tempered relationship is unlikely, considering the bipartisan support in the US for pushing back some of the advancements China has made despite the new US administration.”
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