Asian markets mostly down on China tariff fears

Trump’s protectionist drive returned to fore following an indication Japan was next in firing line.

HONG KONG (AFP) - Most Asian equities sank on Friday as investors fret that the US will ramp up its trade war with China by imposing fresh tariffs, while chip-makers were among the biggest losers following a sharp sell-off in New York.

While emerging market contagion fears continue to stalk trading floors, Donald Trump’s protectionist drive returned to the fore following an indication Japan was next in the firing line, while NAFTA talks with Canada amble along.

Eyes are now on the deadline for a public consultation being carried out on Trump’s plan to hit $200 billion of Chinese goods with levies, adding to the $50 billion already targeted and marking a major step up in a battle between the world’s top two economies.

Beijing has warned it will immediately retaliate against any measures, fuelling fears of an all-out trade war that is already showing signs of causing a drag on the global economy.

The president also appeared to be preparing to set his sights on Japan, with an opinion piece in the Wall Street Journal saying his good relationship with Tokyo "will end as soon as I tell them how much they have to pay".

While Trump has mostly taken out his anger with China and Europe, he has often in the past complained of an uneven trade relationship with Japan.

Japan’s Nikkei led losses, ending the morning one per cent lower with exporters hurt by a stronger yen as dealers ran to the safe-haven unit for shelter from market turmoil.

Sydney lost 0.7 per cent and Singapore dropped 0.4 per cent. Seoul and Taipei gave up 0.2 per cent and Manila was 0.5 per cent off.

However, Hong Kong, which has been battered this week, edged 0.4 per cent higher and Shanghai gained 1.1 per cent, while Jakarta added 0.3 per cent.

Chip firms fried

Chip firms joined their Wall Street counterparts in turning south on growing concerns about demand following a lowering of expectations by US giant KLA-Tencor.

Samsung plunged almost three per cent in Seoul while SK Hynix was four per cent lower. Tokyo Electron and Advantest both dived more than six per cent.

The "earnings trend in (the) semiconductor sector is bound to weaken further as end-demand remains lacklustre while orders have been at very elevated levels," Amir Anvarzadeh, senior strategist with Asymmetric Advisors in Singapore, told Bloomberg News. He called talk of a short, sharp fall over-optimistic.

In foreign exchanges, emerging markets currencies enjoyed some respite after recent losses, with the Indonesian rupiah and South African rand inching higher.

Observers have warned of further turmoil as traders fear the crises in Argentina, Turkey and South Africa could spill over into other economies.

The upheaval has revived worries of a repeat from 1997, when a collapse in the Thai baht mushroomed into a much broader Asian economic crisis.

However, Credit Suisse investment strategist Suresh Tantia said the sell-off could provide long-term benefits for dealers.

"Emerging-market equities are handcuffed by trade uncertainty and concerns around contagion risk at this point of time," he said. "We believe they offer tremendous value as the growth outlook for EM remains healthy and valuations have become very attractive."