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Nikkei Markets

Asian equities fall more as US labels China currency manipulator

China Construction Bank, Ping An Insurance, Great Wall decline

HONG KONG (Nikkei Markets) -- Asian shares outside of Japan extended losses Tuesday on mounting worries over the U.S.-China trade relationship after Washington labeled Beijing a currency manipulator.

The Nikkei Asia300 Index declined 0.6% to 1,219.56, adding to yesterday's near 3% tumble.

At late U.S. hours on Monday, Washington designated Beijing a currency manipulator after the Chinese yuan tumbled below 7 to a dollar for the first time in more than 10 years. The U.S. Treasury said China had taken "concrete" steps in recent days to devalue its currency while maintaining substantial foreign exchange and concluded that the purpose of the devaluation was to achieve an unfair competitive advantage in international trade.

Following the currency manipulation determination, Washington will now engage with the International Monetary Fund to eliminate the unfair competitive advantage attained by Beijing, the U.S. Treasury added.

ANZ Research and Capital Economics pointed out that while the currency manipulation label had limited practical implication considering that U.S. was already imposing punitive tariffs on Chinese goods, the move, nevertheless, marked another escalation in the ongoing trade war.

Capital Economics said it expects that the U.S. will eventually place 25% tariffs on all imports from China. Currently, $250 billion of Chinese imports are taxed at 25% and President Donald Trump said last week that beginning from next month, an additional $300 billion will be taxed at 10%.

Asian equities, however, recovered from their worst levels of the day, helped by the rebound in the yuan. The onshore yuan recouped losses after the People's Bank of China fixed the USD/CNY midpoint lower than what analysts had expected. The Chinese central bank's announcement that it will issue yuan bills in Hong Kong aided a recovery in the offshore yuan.

Hon Hai Precision Industry climbed 0.7% after the Taiwanese electronics contract manufacturing company said sales in July were up 0.6% from a year earlier. Largan Precision fell 1.3% despite a 3% increase in sales last month.

An index of Chinese companies listed in Hong Kong, the Hang Seng China Enterprises Index, declined 0.7%. China Construction Bank slipped 1.2%, Ping An Insurance Group lost 0.5%, and Great Wall Motor ended 2% lower.

Property developer China Evergrande Group fell 2.2% following a 0.5% decrease in the property developer's contracted sales for July. Its peer China Vanke declined 1.6%.

Outside of the A300 index, banking major HSBC Holdings' shares in Hong Kong extended losses, falling 1.1%. The London-based lender said Monday that it plans to cut about 2% of its total workforce and announced the departure of its chief executive officer.

--Nimesh Vora

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