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Asia Pacific Stocks Dip as Markets React to China’s Security Bill for Hong Kong

Stocks in Asia Pacific mostly edged lower in Friday morning trade as investors watch for market reaction to China’s controversial national security law for Hong Kong that was approved on Thursday.

Hong Kong’s Hang Seng index dipped 0.71% by the afternoon as shares of HSBC fell 2.16%.

In Japan, the Nikkei 225 declined 0.52% in afternoon trade as shares of robot maker Fanuc fell 3.11%. The Topix index also shed 0.9%.

South Korea’s Kospi shed 0.57% as shares of chip-maker SK Hynix fell more than 2%. Australia’s S&P/ASX 200 declined 1.03%.

Mainland Chinese stocks bucked the overall trend among the region’s major markets as they edged higher by the afternoon, with the Shenzhen component up 0.48% and the Shenzhen composite adding 0.63%. The Shanghai composite hovered just above the flat-line.

Overall, the MSCI Asia ex-Japan index dipped 0.44%.

China’s National People’s Congress on Thursday approved a national security bill for Hong Kong, calling into focus the embattled city’s autonomy from China. Hong Kong has a “one, party two systems” principle that allows for it to have additional freedoms not available to mainland Chinese residents.

U.S. President Donald Trump said he would hold a press conference on U.S.-China relations, expected sometime on Friday stateside.

“Tensions between the US and Chinese governments over a security law for Hong Kong continue to escalate,” Joseph Capurso, head of international economics at Commonwealth Bank of Australia, wrote in a note. “We consider the tensions between these two governments over Hong Kong, trade, the coronavirus and the South China sea will not fade.”

On the economic data front, Japan’s retail sales fell 13.7% year-on-year in April, according to data released Friday by the country’s Ministry of Economy, Trade and Industry. That compared against a median market forecast of a 11.5% decline, according to Reuters.

Meanwhile, India is also set to release its gross domestic product for the January to March period at 8:00 p.m. HK/SIN on Friday, where the country is expected to report a sharp slowdown.

Overnight stateside, the Dow Jones Industrial Average fell 147.63 points, or 0.6%, to close at 25,400.64. The S&P 500 slid 0.2% to finish its trading day at 3,029.73 while the Nasdaq Composite dropped 0.5% to close at 9,368.99.

The U.S. dollar index, which tracks the greenback against a basket of its peers, was at 98.348 after an earlier high of 98.547.

The Japanese yen traded at 107.34 per dollar after strengthening from levels above 107.8 yesterday. The Australian dollar changed hands at $0.6643, following its rise from levels around $0.66 yesterday.