Trade Worries See China Shares In Bear Territory
As the trade row with the US worsens, China’s stockmarkets are being battered lower.
Donald Trump’s threat to expand his tariff penalties to hundreds of billions of dollars of Chinese exports to the US and also ban any company with 25% more Chinese ownership from buying a stake in a US technology company, has investors deeply worried.
That’s despite ham-fisted attempts by senior administration members tried to down play that last threat and exposed a split.
Two days after the People’s Bank of China, the country’s central bank revealed plans to inject $US100 billion into the small and medium end of the economy via loans and debt to equity swaps, one key Chinese stockmarket dipped into bear territory - that’s a fall of 20% from its most recent peak - with a couple of other measures close behind.
Slowing activity in the economy is being compounded by the fall out from the Trump trade war
The Shanghai Composite slipped 0.5% on Tuesday to close at 2,844.66, a decline of 20.1% from its January peak and down 14 per cent for the year to date.
The CSI 300 index of big companies listed in Shenzhen and Shanghai is down 19.6% from its January peak.
The Financial Times said last night "The move by the People’s Bank of China was seen by analysts as an attempt to calm market concerns, which along with US-China tensions were exacerbated by weak data and a cut in the growth outlook.
“The deterioration in US-Sino trade relations has sparked big falls on Wall Street and in Shanghai, notably in the technology and industrials sectors, as investors worry that companies with complex global supply chains are exposed."
The fall in China has outstripped what is a weak performance on the ASX for the ASX 200 is down 2.2% so far this year - a performance improved by the 3% rise so far in June.
Local investors have been warning what is happening on the Chinese markets in the past year or so and have taken their leads exclusively from the US.
The appearance of a bear market in China might be a reason to resume keeping a close eye on what is happening with more Chinese stocks included in global market indexes.
Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.
At the AFR he was a finance writer, Finance Editor, News Editor and Chief of Staff. At the Nine Network he was supervising producer of Business Sunday for more than 16 years. He has also written for other online and analogue print publications here and overseas.