Asian markets on edge as traders brace for Pelosi's possible Taiwan visit

Asian markets on edge as traders brace for Pelosi's possible Taiwan visit

Why one former diplomat is worried about Pelosi's visit to TaiwanReplayMore Videos ...

Why one former diplomat is worried about Pelosi's visit to Taiwan 02:58Hong Kong (CNN Business)Asian stock markets tumbled on Tuesday, with indexes in Hong Kong, Taiwan, and Shanghai leading the way, as investors were jittery about US House Speaker Nancy Pelosi's expected visit to Taiwan that could severely escalate tensions with China.

Hong Kong's Hang Seng Index (HSI) slid 3%. Mainland China's Shanghai Composite Index (SHCOMP) also tumbled 2.6%. Taiwan's Taiex declined 1.7%. Japan's Nikkei 225 (N225) also shed 1.6%, and Korea's Kospi (KOSPI) lost 0.8%.The Taiwan dollar weakened 0.2% against the US dollar. Meanwhile, the Japanese yen, a traditional safe-haven currency, surged 0.7% against the greenback.Worries about escalating tensions in Taiwan Strait are roiling markets.Read MorePelosi is expected to visit Taiwan as part of her tour of Asia, according to a senior Taiwanese government official and a US official, despite warnings from Biden administration officials, who are worried about China's response to such a high-profile visit.The stop — the first for a US House speaker in 25 years — is not currently on Pelosi's public itinerary and comes at a time when US-China relations are already at a low point.During a regular foreign ministry briefing Monday, China warned against the "egregious political impact" of Pelosi's planned visit to the self-governing island that China claims as a part of its territory. Zhao Lijian, a spokesman for the foreign ministry, said that the country's military "won't sit by idly" if Beijing feels its "sovereignty and territorial integrity" is being threatened."Pelosi's Taiwan visit is tainting sentiment today. And amid escalating tensions in Taiwan Strait and deepening worries about a global economic slowdown, investors are diving headlong into US bonds," said Stephen Innes, managing partner at SPI Asset Management, on Tuesday."No party wants a real war, but the risk of mishap or even aggressive war game escalation is real, which could always lead to a tactical mistake," he said. ING analysts, meanwhile, expected that China could send warplanes near Taiwan or even over it "before, during and after" Pelosi's possible visit. "It seems that the US has underestimated or misread President Xi's stance on Taiwan. The determination of Xi on uniting Taiwan with Mainland China is extremely firm, " the analysts said in a research note on Tuesday."We should see weakness in the Chinese yuan and Taiwan dollar over the coming days," they added.CNN's Eric Cheung, Kylie Atwood, Alex Rogers and Kevin Liptak contributed to this report.

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