A shares plunge on Trump policy
Experts say that stock markets won’t fall further
The mainland stock markets plunged on Tuesday, sparked by US President Donald Trump’s intensifying measures against Sino-US trade, aggregating the falling trend for A shares in recent weeks.
In a rare response from China’s central bank about Tuesday’s stock slump, Yi Gang, governor of the People’s Bank of China, said that the A shares’ fluctuation on Tuesday was influenced by mood.
“Stock markets fall and rise. Investors should keep calm and rational,” Yi said, according to a statement on the PBC’s website.
Dong Shaopeng, an expert advisor for the CSRC, told the Global Times on Tuesday that investors should understand that Trump’s tax policies against China may have some negative impact on the domestic economy, but they won’t fundamentally reverse China’s economic fundamentals and financial markets.
He also suggested that the government should show understanding for some domestic financing channels so as to ease liquidity in the markets.
Xi Junyang, a finance professor at the Shanghai University of Finance and Economics, told the Global Times on Tuesday that a bull market in A shares will “only be late, but never disappear.”
The experts’ comments came as the mainland stocks plunged on Tuesday. The benchmark Shanghai Component Index slumped by 3.78 percent on Tuesday, while the Shenzhen Component Index slumped by about 5.31 percent.
On Friday, Trump said he was pushing ahead with hefty tariffs on $50 billion of Chinese imports, according to a report from Reuters. He also threatened to impose tariffs on another $200 billion worth of Chinese goods and potentially even more if the Chinese government hits back on the existing tariff policy.
Xi Junyang, a finance professor at the Shanghai University of Finance and Economics, said that Trump’s tax fight against China is to be blamed for the A shares’ slump.
“The tax increase will severely affect China’s export-related industries. Importing will also be negatively influenced by China’s efforts to fight back,” Xi told the Global Times on Tuesday, adding that compared with overseas markets, the A-share markets are even more sensitive to external news.
Yang Delong, chief economist at Shenzhen-based First Seafront Fund Management Co, said that the mainland stock markets have continuously corrected as the trade friction between the US and China has sparked “panicky selling on the market.”
Adjust deleveraging
Dong said that the government should take measures to cope with the negative influence stemming from Trump’s policies. “To begin with, the government should use monetary and fiscal tools to release a certain level of liquidity,” he said.
According to Dong, some of the government’s deleveraging efforts have been indiscriminate in terms of implementation. “For financial activities like trust, loan and equity pledge financing, they should be properly supervised to exclude risks, but the government should also show respect and understanding for direct financing channels to keep liquidity at a reasonable level,” he said.
Li Daxiao, an analyst at Shenzhenbased Yingda Securities, said that A shares won’t fall to the extent of the stock disaster of 2015, thanks to China’s economic power as well as overseas capital’s thirst for A-share assets.
Xi also said that the A-share markets are unlikely to slide further, as the market has already digested the Trump sanctions to a great extent. “Even though the tariffs on the $200 billion will become reality in the future, they will be unlikely to cause a big splash on mainland stock markets like this time.”
“The bull market in A shares will only be late, but never disappear.” Xi Junyang Finance professor at the Shanghai University of Finance and Economics