Asian Markets Tense Over Pelosi's Possible Taiwan Visit

Asian stock markets have been shaken by growing tensions between the US and China over US House of Representatives Speaker Nancy Pelosi’s anticipated visit to Taiwan.

Markets across the region weakened on Tuesday amid expectations Pelosi would visit the democratically ruled island, ignoring China’s warnings of “serious consequences” if the senior US politician goes through with the trip.

The Shanghai Composite Index slumped 2.6%. Hong Kong’s Hang Seng index dipped 3%. Taiwan's Taiex shed 1.7%. Japan's Nikkei 225 lost 1.6%, and Korea's Kospi dropped 0.8%.

Pelosi is expected to visit Taiwan as part of her tour of Asia, according to senior Taiwanese officials close to the matter. This is despite warnings from Biden administration officials, who are worried about China's response to such a high-profile visit. 

What does this mean for me? 

The stop could be the first for a US House speaker in 25 years and comes at a time when US-China relations are already at a low point.

Analysts feel the US has underestimated the firmness of President Xi on the matter. China’s leader is intent on uniting Taiwan with mainland China as a major part of his political agenda. A high-profile visit like this could be a tactical mistake on the part of the US.

Economically, markets could see a weakness in the Chinese yuan and Taiwan dollar over the coming days, an eventuality that is unwelcome with so much else troubling the markets.