Jump in China’s Industrial Profits Underpin Asian Shares; New US Restrictions Sink Chinese Chipmaker SMIC

James Hyerczyk
·3-min read

The major Asia-Pacific stock indexes are trading mixed into the close on Monday with most attention being placed on the steep plunge in Hong Kong-listed shares of Chinese chipmaker SMIC. Chinese stocks provided much of the support for the markets though sentiment was still cautious ahead of a U.S. Presidential debate and as a spike in new coronavirus cases undermined global economic recovery hopes.

In the cash market on Monday, Japan’s Nikkei 225 Index settled at 23511.62, up 307.00 or 1.32%. Hong Kong’s Hang Seng Index is trading 23444.56, up 209.14 or +0.90% and South Korea’s KOSPI finished at 2308.08, up 29.29 or +1.29%.

In China, the Shanghai Index settled at 3217.53, down 1.88 or 0.06% and Australia’s S&P/ASX 200 Index closed at 5952.30, down 12.60 or -0.21%.

US Tightens Exports to China’s Chipmaker SMIC, Citing Risk of Military Use

The United States has imposed restrictions on exports to China’s biggest chip maker SMIC after concluding there is an “unacceptable risk” equipment supplied to it could be used for military purposes.

Suppliers of certain equipment to Semiconductor Manufacturing International Corporation (SMIC) will now have to apply for individual export licenses, according to a letter from the Commerce Department dated Friday and seen by Reuters.

The latest move marks a shift in U.S. policy from earlier this year, when applicants seeking “military end user” licenses to sell to SMIC were told by the Commerce Department that the licenses weren’t necessary, according to three people familiar with the matter.

SMIC said it had not received any official notice of the restrictions and said it has no ties with the Chinese military.

China’s Blue-Chip Index Rises after Upbeat Industrial Profits

China’s blue-chip index started the week on a positive note after latest data pointed to a continued recovery in the world’s second-largest economy from the coronavirus crisis.

Profits at China’s industrial firms grew for the fourth straight month in August, buoyed in part by a rebound in commodities’ prices and equipment manufacturing, the statistics bureau said on Sunday.

China’s recovery has been gaining momentum as pent-up demand, government stimulus and surprisingly resilient exports propel a rebound.

China’s industrial profits rose 19.1% in August, the country’s National Bureau of Statistics announced over the weekend. Chinese economic data has been watched by investors for signs of the country’s continued recovery from the coronavirus pandemic.

South Korea Stocks Jump 1.3% as Daily Virus Cases Drop; Heavyweights Shine

South Korean shares rose on Monday, driven by major heavyweights, as sentiment boosted after the country reported the smallest number of daily coronavirus cases in over a month. The won weakened, while the benchmark bond yields also fell.

The country reported 50 new coronavirus cases, the lowest since a new wave of outbreaks emerged from a church and a large political rally last month.

Shares of South Korean chipmakers Samsung Electronics and DB Hitek rose on hopes that they may benefit from the United States’ new export restrictions on China’s biggest chipmaker SMIC.

South Korean biopharmaceutical company Celltrion and its affiliates Celltrion Pharm and Celltrion Healthcare jumped on the company’s merger announcement.

For a look at all of today’s economic events, check out our economic calendar.

This article was originally posted on FX Empire