China Tech Stocks Suffer Most as Trade War Fears Rattle Markets

May 06 2019, 4:25 AMMay 06 2019, 6:44 AMMay 06 2019, 4:25 AMMay 06 2019, 6:44 AM

(Bloomberg) -- Chinese tech and telecom stocks were the hardest hit Monday as two tweets from U.S. President Donald Trump soured the outlook on trade talks and sent global markets plunging.

A gauge of information technology stocks headed for its biggest drop in five years, leading the MSCI China Index lower. Telecom equipment maker ZTE Corp. tumbled as much as 13 percent in Hong Kong, while Apple Inc. supplier GoerTek Inc. slumped by the 10 percent daily limit in Shenzhen. China is considering delaying a trip by its top trade negotiators to Washington, according to people familiar with the matter, after Trump said progress was too slow and threatened steeper tariffs.

“If the trade talks don’t go well, China’s 5G-related companies will definitely be affected,” said Amy Lin, a Shanghai-based analyst with Capital Securities Corp., referring to names linked to next generation telecom networks. “The sector is also under correction pressure after their strong gains.”

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MSCI China’s tech stocks gauge surged 34 percent this year through last week, the second-best performer, helped by earlier optimism over trade talks. The sector has become a trade war proxy as giants from ZTE Corp. to Huawei Technologies Co. found themselves at the center of an escalating technology rivalry between China and the U.S. The MSCI sub-gauge tumbled as much as 7 percent Monday, while the ChiNext gauge of tech firms and small caps fell 6.6 percent in Shenzhen, heading for its biggest loss since 2016.