Chinese stocks rebound, but yuan edges down

Economy hardly impacted by trade war, but low confidence prevails: expert

Chinese mainland stocks sharply rebounded from a fouryear low on Tuesday, supported by gains in infrastructure shares, but the yuan continued to slide down.

Liu Shijing, vice president of the China Development Research Foundation and member of the Monetary Policy Committee of the People’s Bank of China, said on Tuesday during the 2018 Summer Davos Forum that the trade dispute between the US and China has had a limited impact on the overall development of the Chinese economy, but has affected market expectations, which seems to be reflected through the fluctuating stock and currency markets.

On Tuesday, China said it has no choice but to retaliate against new US trade tariffs that will be imposed on $200 billion worth of Chinese imports from September 24.

“It’s normal that the domestic market will overreact [to the trade war]. China will persist in opening up despite those blows,” Liu said.

The Shanghai Composite Index opened lower and had fallen 0.12 percent to 2,648.53 points by the lunch break, before ending 1.82 percent higher at 2,699.95 points at trade closing. On Monday, the trading volume on the Shanghai and Shenzhen bourses reached 86.96 billion yuan ($12.66 billion), the lowest point this year.

Yang Delong, chief economist at Shenzhen-based First Seafront Fund Management Co, told the Global Times on Tuesday that the light trading on the stock markets shows that there is somehow a severe lack of confidence in the two markets.

“As long as the absence of major positive news continues, market fluctuation will continue,” he said.

According to Yang, valuations of A shares have dropped to a historic low.

“Signs have shown that the mainland markets are now lingering around the bottom area, and that the space is not big enough for further declines,” he said.

The yuan’s exchange rate is continuing its trend of depreciation. The spot yuan was changing hands at 6.8648, 0.11 weaker than the previous session close.

The drops in the stock and exchange rate markets are mostly being caused by the ongoing trade war between the US and China, said Yang. “But with the landing of those tariff hikes, the influence on A shares will gradually diminish.”