1400 Thursday 6 December 2018
News stories surrounding Huawei have been circulating for some time now, recently, surrounding nations banning or blocking the Chinese telecoms company from providing services or products within them. In August, President Donald Trump signed a bill that effectively banned the use of Huawei technology in America on the basis of national security through fears that the firm was being used by the Chinese government to spy. Since then, both Australia and New Zealand have blocked the use of Huawei technology in future 5G infrastructure. Although the UK has not banned the Chinese firm, this week BT announced that they will be removing their technology. Many people think of Huawei only as a mobile phone manufacturer, for which they overtook Apple to be the world’s number two company, but globally they are also known for their infrastructure technology in the telecoms sector.
Today’s headlines however are related to a different subject matter… Iranian sanctions.
It was revealed that on 1st December, Canadian authorities arrested and detained Huawei CFO Meng Wanzhou at the request of the US government and she currently awaits extradition to the US. The charge does not relate to any form of espionage, but to the supplying of technology to Iran, which is in breach of the US sanctions applied over the territory. Although not related to the US/China trade wars, the arrest could not have come at a worse time for global markets. Meng Wanzhou is the daughter of Ren Zhengfei, the Huawei founder, and is a much revered figure within China. News of the arrest has been met with much dissatisfaction from China with a statement from the embassy in Canada stating they “firmly opposes and strongly protests over such kind of actions which seriously harmed the human rights of the victim”.
As previously mentioned, the arrest stems from an investigation dating back to at least 2016 and has no relation to the current political situation between the two countries, but the fact that it took place on Saturday, the day Donald Trump and Xi Jinping sat to seek an end to the trade wars, is an irony that has not been lost on the market today. The Hang Seng was the first index to react to the news, closing almost 2.5% down, the Nikkei closed almost 2% down and a fear contagion that trade wars may be inflated has spread throughout Europe today with major indices down between 2 and 2.5%.
As we approach the opening bell in the US, all eyes will be focussed on what effect the news will have on the market.
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