HONG KONG (BLOOMBERG) - The worsening trade war between Beijing and the Washington is prompting investors to ditch Chinese shares traded in the US at a speed not seen since the global financial crisis.
The S&P/BNY Mellon China ADR Index has plunged 15 per cent in May, putting it on track for its worst monthly performance since October 2008. Social media firm Weibo Corp, online media company Sina Corp and Internet search firm Baidu Inc have all declined more than 30 per cent. Losses aren't confined to the US - in Hong Kong, the Hang Seng China Enterprises Index of Chinese firms is down almost 10 per cent, the worst performance among major global benchmarks.
The scale of the rout shows how tainted Chinese assets have become since the Trump administration stepped up pressure against Beijing this month by imposing tariffs and taking steps to limit the country's access to key technologies. Just three weeks ago the S&P/BNY Mellon's ADR index was nearing a nine-month high, while the Shanghai benchmark's first-quarter rally was its best start to a year in a decade.
The timing of the slump is bad news for investors who track MSCI's global benchmarks. The index compiler is increasing weightings of Chinese mainland-listed companies in its gauges, which are already heavily dominated by overseas-traded Chinese firms. Chinese companies have contributed to more than a quarter of this month's declines on the MSCI Emerging Markets Index, led by Tencent Holdings .
A slumping yuan is adding to investor pain by reducing the value of Chinese company earnings when converted into dollars. The onshore Chinese currency is down 2.5 per cent this month, while the offshore rate is 2.8 per cent lower.
There is so far little sign that things will get better quickly. China blamed Washington for wrecking trade talks and insisted the US must alter its "wrong practices" before negotiations can resume.
"China's stance on the talks has been clear - if the US wants to resume talks, they should show sincerity and correct their wrong practices," ministry spokesman Gao Feng said in Beijing on Thursday.
The same day, US President Donald Trump described China's Huawei Technologies Co as "very dangerous," even as he said it could be included in some kind of trade deal with Beijing. His administration also proposed tariffs on goods from countries found to have undervalued currencies, which could broaden Trump's trade salvos.
The Hang Seng China gauge is on track for its worst monthly drop since January 2016, with selling momentum at its most intense in 11 months. Among the laggards is Air China Ltd., down more than 20 per cent in May. China Tower Corp Ltd - a key player in the country's next-generation telecom networks - has lost 18 per cent. The race for 5G supremacy has also been a contentious factor in China's relationship with the US.