Chinese stocks were under pressure in the overnight session as the Biden administration proposed stricter sanctions on China's largest chipmaker, according to Bloomberg.
The Hang Seng Tech index closed down 1% to 23,420 amid worries of further regulatory crackdowns on Chinese tech companies by the US.
The reason for the downdraft in Chinese stocks is the National Security Council will hold a meeting Thursday to tighten the rules on exports to China's largest chipmaker, Shanghai-based Semiconductor Manufacturing International Corp (SMIC).
One proposal being considered at the meeting would prevent the export of machinery to produce advanced electronic components. This could limit US-based KLA Corp. and Lam Research Corp.'s exports of semiconductor equipment to SMIC.
SMIC plunged as much as 4.3% in Hong Kong on the news.
Citigroup's analysts Atif Malik and Amanda Scarnati responded to the overnight surprise. Both wrote in a note that "we continue to see low likelihood of new restrictions at least until the semiconductor supply chain shortages normalize."
So maybe it's just more bark from the Biden administration for optics. We're sure implementing such a restriction amid snarled supply chains in a midterm year would spark a tit-for-tat battle with Beijing that could prove to be disruptive.
Waking up this morning in the US, traders will find shares in U.S.-listed Chinese firms down. Shares in commerce giant Alibaba dropped as much as 2.3%, online marketplace operator JD.com -1.8%, e-commerce platform operator Pinduoduo -2.1%, Baidu -1.9%, Bilibili -2.4%, ride-hailing firm Didi -1.6%. The Nasdaq Golden Dragon China Index has dropped more than 40% on the year.
On Thursday, the Financial Times also reported that the Biden administration would place eight Chinese companies on its...