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Published On: Sat, Jun 23rd, 2018

China’s Stocks Lose $514B in Market Cap

Trade wars are intensifying between the United States and China, leading Asian markets to hit a six-month low. China’s stocks are taking the brunt of the tension internationally, although European markets may be hit harder in coming weeks on new threats of tariffs against the auto industry.

Chinese flag, Beijing, China. 2009 Photo/Daderot

China’s FXI ETF has suffered eleven sessions of losses, hitting a milestone that the ETF hasn’t hit since 2012. Since the market’s high on January 26, the ETF has fallen 19% through June 22, 2018.

China has responded with tariffs of their own and threats of additional tariffs every time Washington threatens tariffs. The war of words, as many outlets are calling it, is a war that China has shown they will take part in without fear for the short-term economic impact that will follow.

Traders remain concerned that the trade wars will start to spill over into other countries.

Analysts are suggesting that if China’s market moves into bear territory, trading in the United States will feel negative impacts, too.

Trade wars will hurt both countries equally, and increased threats of new tariffs out of the United States adds to the expectation that markets will become pressured in the coming months.

China has already lost $514 billion in market cap this week, and since January’s high, the Shanghai Composite Index has fallen to a near 20% decline. A continue in the declining trend will return China’s market into bear territory for the first time since 2015.

The swift decline this week is due to the Trump administration threatening to impose an additional $200 billion in tariffs following Beijing’s retaliatory measures.

China’s Shanghai Composite is up as much as 34% in the past two years as state-linked funds intervened and helped spur growth. Equities were supported thanks to the intervention, and volatility hit record-level lows. The country’s biggest companies are leading the turnaround with growing earnings.

A risk of a credit crunch is increasing among higher tensions with China. Analysts fear that long-term impacts will lead to further monetary tightening. Foreign investors have started a major sell-off, with 1.99 billion yuan sold off on Tuesday and an additional 834.2 million yuan on Thursday.

China’s market has been more volatile to bad news than the United States, with the country’s index falling 3.2% over the past four days compared to U.S. indexes falling 0.3%. The country’s close ties to the stock market in China and attempts to boost stock prices over the last three years, is likely to suffer as the threats of increased tariffs continue.

Author: Jacob Maslow

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  1. […] its impact on commodities  Moneycontrol.comWhat it looks like on the front lines  Bend BulletinChina’s Stocks Lose $514B in Market Cap  The Global DispatchWhat a trade war with China looks like on the front lines  The Straits […]

  2. […] China’s Stocks Lose $514B in Market Cap  The Global Dispatch […]

  3. […] China’s Stocks Lose $514B in Market Cap  The Global Dispatch […]

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