China’s markets set to reopen with trade, Hong Kong in focus

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Chinese financial markets are set to open for the first time in a week on Tuesday, with investors likely to focus on this week’s trade talks with the US and the worsening situation in Hong Kong.

Room for disappointment is growing. The Trump administration placed eight Chinese technology companies on a US blacklist on Monday. Separately, senior Chinese officials have indicated the range of topics they’re willing to discuss has narrowed considerably, people familiar with the matter said. In Hong Kong, a ban on wearing masks spurred violent protests across the city, with banks and shops vandalized, and much of the transport network shut down.

There are few leads from offshore trading for mainland investors. Chinese stocks in Hong Kong were marginally lower last week while mainland markets were closed, while the offshore yuan little changed through Monday. Hong Kong’s financial markets were also closed Monday for a holiday.

The blacklisted firms include two video surveillance companies — Hangzhou Hikvision Digital Technology Co. and Zhejiang Dahua Technology Co. — with the US accusing them of being implicated in human rights violations against Muslim minorities in China’s far-western province of Xinjiang.

Entities on the list are prohibited from doing business with American companies without being granted a US government license, though some have maintained relationships with banned companies through international subsidiaries.

Hong Kong’s outlook remains clouded. The Hang Seng Index tumbled 8.6% last quarter, the biggest loss among major global gauges tracked by Bloomberg. Developers and mall operators dropped most as the escalating protests weighed on the economy and deterred travelers to the city.

A teenage demonstrator was shot and wounded during a struggle with police Friday. Local media including the South China Morning Post also reported a man was dragged from his taxi and seriously beaten after apparently plowing into a crowd of protesters. The MTR Corp. provided only limited train service Monday and planned to close all stations for repairs at 6 pm, after halting all lines except direct routes to the airport on Saturday.

The nation’s markets were calm heading into the holidays, which marked the 70th anniversary of the People’s Republic. The Hang Seng China Enterprises Index hasn’t closed more than 1% higher or lower for the past 12 trading days, its longest streak since September 2017.

The yuan has stabilized after falling heavily in August, when it weakened past the key 7-per-dollar level for the first time since the financial crisis. The currency dropped almost 4% in the third quarter, the worst performance in Asia. It last traded at 7.1483 a dollar.

“Our base scenario is that China and the US will reach a partial deal,” which will support the yuan in the coming weeks, Ken Cheung, chief Asian foreign-exchange strategist at Mizuho Bank Ltd, said last week. “But depreciation pressures will resurface if both sides fail to make further progress.”