The trade war between the US and China entered a new phase on Monday after China allowed the value of the yuan to weaken past the US dollar for the first time in over 10 years. The move sent stocks plummeting, with risky companies such as tech and gaming being some of the hardest hit.
As of midday on Monday, shares in Electronic Arts (NASDAQ: EA) fell by over 4% while Take-Two Interactive (NASDAQ: TTWO) dropped 5% and Activision Blizzard (NASDAQ: ATVI) fell over 6%. Shares in Ubisoft (EPA: UBI) also fell by over 3%.
Both Sony and Nintendo (TYO: 7974) fell between 2% to 3% on Monday, with Microsoft (NASDAQ: MSFT) being the hardest hit console maker, dropping almost 4%.
Meanwhile, shares in chip maker Intel (NASDAQ: INTC) fell by over 3%, while Advanced Micro Device (NASDAQ: AMD) dropped over 5% and Nvidia (NASDAQ: NVDA) lost the most, falling over 7%.
Not even tech giants such as Apple (NASDAQ: AAPL), Google (NASDAQ: GOOGL), and Facebook (NASDAQ: FB), and Amazon (NASDAQ: AMZN) – which all have gaming sectors – were immune. They fell by about 5%, 4%, 5%, and 4% respectively on Monday. Shares in the Chinese mega-conglomerate Tencent (HKG: 0700) also fell over 4%.
In the mobile gaming sector, Zynga (NASDAQ: ZNGA) shares tumbled over 5%, even though the company raised its full year guidance last week after a strong second quarter. Conversely, Glu Mobile (NASDAQ: GLUU) was one of the few gaming companies to grow, rising by around 4% on Monday while recovering from last week’s 37% drop when it lowered its full-year guidance.
The Nasdaq plummeted -3.74%, or 299.72 points by mid-day, caused by China potentially weaponizing its currency. The move stoked fears that China was undervaluing its currency to make its exports more competitive in global markets. Undervaluing its currency could contribute to an even greater US trade deficit.
The People’s Bank of China has denied intentionally weakening the yuan in relation for the US threatening to increase tariffs on Chinese exports. It said in a statement (translated) that it would not “use the exchange rate as a tool to deal with external disturbances such as trade disputes.”