Tensions over a planned US ban on major Chinese apps hurt most Asian markets on Friday, with Philippine stocks taking an added hit after a jump in coronavirus infections lifted the country’s case load to the highest in Southeast Asia.
Malaysia’s ringgit, often seen as a proxy for China’s yuan, lost 0.3 percent while the South Korean won fell 0.4 percent as investors worried about further trade restrictions would be the end result of the tensions.
Citing security concerns, President Donald Trump issued executive orders on Thursday that will ban US transactions with ByteDance, the Chinese owner of the popular video-sharing app TikTok, and Tencent, owner of the WeChat app, in 45 days time.
That sank Chinese markets in morning trade, and the rest of the region followed. The Singapore dollar, another trade- and China-sensitive currency, fell 0.3 percent.
Apart from the obvious fallout to Tencent and ByteDance, Washington DC’s moves are sure to ratchet up geopolitical tensions with Beijing once again, after a relatively quiet couple of weeks, said Jeffrey Halley, senior market analyst at OANDA.
“We would expect the sell-off to gather pace as the day goes on, with investors reducing risk into what could be a fraught US session,” he said.
The rising geopolitical tensions come at a time when a number of the region’s developing economies are struggling with fresh coronavirus outbreaks.
Philippine equities fell as much as 1 percent after the country recorded a surge in infections late on Thursday, overtaking Indonesia as the worst hit country in Southeast Asia. The capital Manila has been placed in a fresh lockdown.
The spike in cases also followed dismal data on Thursday which showed gross domestic product plunged 16.5 percent in the second quarter.
Thailand’s baht also eased as it delayed plans for a “travel bubble” agreement with select countries with low infections, citing the second wave of cases. That will put pressure on its vital tourism industry and complicate efforts to revive a battered economy.
The Malaysian ringgit trimmed initial losses after data was released showing industrial production fell a marginal 0.4 percent in June from last year, far from the 10.4 percent fall forecast by analysts surveyed by Reuters.
The Indonesian rupiah eased, as the central bank bought 82.1 trillion rupiah ($5.63 billion) of government bonds in a private placement, the first transaction under a COVID-19 burden-sharing scheme with the government that some analysts say carries inflationary risks.