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Boeing slumps after editor's tweet raises prospect of lost China sales
BOEING Co fell to the lowest closing level in four months as US-China trade tensions escalated and the influential editor of a Chinese tabloid warned that the company's airplane sales in the country could be "reduced."
Hu Xijin, editor-in-chief of the Global Times, which is published by the Communist Party's People's Daily, tweeted on Monday that China may stop purchasing US agricultural and energy products, cut Boeing orders and restrict trade in American services. He regularly weighs in on China's international affairs, often citing unidentified sources he says are authoritative. The tweet triggered speculation over whether Mr Hu was reflecting government thinking on the issue.
The tweet and jittery market response underscore the risks faced by Boeing, the largest US exporter, from the escalating US-China trade fracas. The Chicago-based manufacturer's jetliners so far haven't been targeted for retaliation by the Chinese government, which has few alternatives for the country's fast-growing airlines.
China has other ways to pressure Boeing aside from aircraft orders, which the country has carefully split between the US planemaker and European rival Airbus SE for maximum leverage. China was the first to ground the 737 Max, hours after a deadly March 10 crash in Ethiopia and before the plane's data and voice recorders had been recovered.
Aerospace analysts expect Chinese regulators to conduct an especially lengthy review of the Max as Boeing works with safety regulators around the globe to return the single-aisle workhorse to service. China is the largest global market for the 737, Boeing's main source of profit.
"We're confident the US and China will continue trade discussions and come to an agreement that benefits both US and Chinese manufacturers and consumers," said Boeing spokesman Gordon Johndroe.
The shares dropped 4.9 per cent to US$337.37 by the close in New York, the lowest closing price since Jan 7. Caterpillar Inc, Apple Inc and United Technologies Corp were among stocks hit harder as the US and China exchanged trade volleys.
China's aircraft orders have slowed to a trickle over the past 18 months. But the country isn't likely to cancel Boeing orders since Airbus's popular A350 and A320neo lines are sold out through 2021 and 2027, respectively, Ron Epstein, analyst with Bank of America Merrill Lynch, said in a note to clients on Monday. China's own competitor, the Comac C919, is years away from its public debut.
"While China is crucially reliant on US and European technology for its own aerospace industry, the reverse is not true," Mr Epstein said. "The majority of Boeing's aerospace manufacturing is domestic, particularly for critical flight-related technology." BLOOMBERG