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Asian shares drop on news US set to blacklist Chinese firms

Asian stock market

MSCI’s broadest index of Asia-Pacific shares outside Japan fell 0.6%, mainland Chinese shares dropped 0.4%, while Hang Seng declined 1%

Asian shares slipped on Friday after Reuters reported that the United States is set to add dozens of Chinese companies, including the country’s top chipmaker SMIC, to a trade blacklist later in the day.

Still, the prevalent underlying mood on global equities remained upbeat, as the prospect of a major U.S. coronavirus relief package meant investors were keen on picking up stocks and other risk-exposed assets.

MSCI’s broadest index of Asia-Pacific shares outside Japan dropped 0.6% from Thursday’s record. Mainland Chinese shares fell 0.4% while Hong Kong’s Hang Seng lost 1%.

Washington is expected to name some Chinese companies, sources said, adding in total around 80 additional companies and affiliates to the so-called entity list, nearly all of them Chinese.

Meanwhile, global equities on the whole basked in optimism that a deal will be reached over a fresh U.S. economic stimulus package.

Lawmakers from both major U.S. political parties said failing to agree was not an option, and earlier Republican Senate Majority Leader Mitch McConnell said talks could spill into the weekend.

Many investors saw the passing of new measures to support the economy as imminent after data showed the number of Americans filing first-time claims for jobless benefits unexpectedly rose last week.

Markets were encouraged that the United States stood ready to ship 5.9 million doses of a new coronavirus vaccine developed by Moderna that is on the cusp on winning regulatory approval.

Even though the current state of outbreak is so bleak, markets are assuming vaccines will help the U.S. achieve a herd immunity next year and that everybody will be dancing in spring, with pent-up demand for consumption exploding, said Kozo Koide, chief economist at Asset Management One.

Fund managers would be wise to ride on this bandwagon for now, but markets appear to be underestimating uncertainties. It’s not known exactly how long vaccines will protect you. There will be disappointment if markets learn they are not like measles vaccines, one shot of which will last for life, he added.

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