Broader Geopolitical Worry & Potential Fresh U.S. Sanctions On Chip Names Weigh

Spill over from Friday’s wider geopolitical worry pressured Asia-Pac equities on Monday.

• The CSI 300 shed 1%.
• From a sector specific standpoint, tech names struggled after widespread reports of the U.S. being poised to issue fresh restrictions re: the Chinese chip sector.
• The ChiNext shed 2% and the Hang Seng Tech Index finished 1.8% lower on the day as a result.
• The latest efforts by the regulators to support the market, punctuated by tighter restrictions re: short selling, did little to offset the negative tone.
• A multi-year high net MLF injection also did little to turn the tide, with the PBoC seemingly having one eye on the need to provide liquidity around government bond issuance and the other on the well-documented economic headwinds that China is facing.
• On the latter point, most still seem to expect further monetary easing, with a front-page report in the Securities Daily pointing to the likelihood of further interest rate and RRR cuts from the PBoC before year end.
• This came after PBoC Governor Pan once again pledged more substantial support for the economy, alongside a flagging of the recent improvement in Chinese data.
• On the flow side, mainland equities saw CNY6.5bn of outflows via the HK Stock Connect links on Monday.