HONG KONG: Hong Kong and mainland stocks plummeted Thursday with Chinese technology firms taking the brunt of the selling after a top executive at telecoms giant Huawei was arrested over alleged Iran sanctions breaches by the firm.
The Hang Seng Index dived 2.47 percent, or 663.30 points, to 26,156.38.
And the benchmark Shanghai Composite Index fell 1.68 percent, or 44.63 points, to 2,605.18, while the tech-rich Shenzhen Composite Index, which tracks stocks on China’s second exchange, sank 2.17 percent, or 30.03 points, to 1,350.75.
Just days after Donald Trump and Xi Jinping agreed a ceasefire in their painful trade war, news broke that Huawei chief financial officer Meng Wanzhou had been held in Canada and was facing extradition to the United States.
Meng is the daughter of company founder Ren Zhengfei, a former Chinese People’s Liberation Army engineer.
The company had been investigated by US intelligence, who deemed it a national security threat.
The news has fuelled concerns about already fraught relations between the world’s top two economies, with questions beginning to be asked about the strength of the Trump-Xi pact last weekend, which had fuelled a huge relief rally Monday.
China expressed outrage at the arrest, urging Canada and the US to “immediately correct the wrongdoing”.
However, later Thursday it appeared to soothe concerns about the trade pact by saying it would “immediately” implement the agreed measures on agricultural products, energy and autos.
Tech security is one of the key sticking points in the months-long trade row, with Washington pointing to security issues.
Earlier this year the US banned personnel on US military bases from buying phones and other gear manufactured by Huawei and another Chinese firm ZTE.
Donald Trump also blocked a deal that would have allowed a Singapore-based firm to acquire US chipmaker Qualcomm, claiming it would enable Huawei to set the pace of the global rollout of 5G technology.
Against this background the arrest has battered Chinese tech firms.
ZTE –which this year was subject to a US banning order over security fears before that was reduced to a massive fine — finished down 5.94 percent at HK$15.52 in Hong Kong, while its Shenzhen-listed stock tanked 5.69 percent to 19.89 yuan.
Among other Hong Kong-listed firms Sunny Optical Technology — which supplies Huawei — shed 5.47 percent to HK$69.95, while market heavyweight Tencent was down 5.23 percent at HK$304.20.
AAC Technologies sank 5.59 percent to HK$51.55.
The Hang Seng China Enterprises Index, which measures the performance of mainland shares in Hong Kong, plunged 2.57 percent, in one of its biggest falls this year.
“The news on Huawei comes at a bad time when investor sentiment is weak,” Toshihiko Takamoto, a money manager at Asset Management One, told Bloomberg News.
“The consensus is that this trade war may drag on for 10 years.”
Huawei suppliers were deep in negative territory. In Shanghai, Foxconn Industrial Internet gave up 2.76 percent to 11.96 yuan and Hundsun Technologies lost 3.01 percent to 54.15 yuan.
And in Shenzhen, O-film Tech ended 4.46 percent lower at 10.70 yuan, while iFlytek Co. fell 2.78 percent to 24.50 yuan.
“The market is very nervous as the uncertainties of US-China trade negotiations have increased,” said Zhang Gang, a strategist with Central China Securities.
“Most institutional investors are also unwilling to take risks when the end of the year draws near,” Zhang added.