Share market falls amid China-US trade tensions
SHANGHAI shares tumbled yesterday as investors became worried amid trade tensions between China and US.
The Shanghai Composite Index fell below the 3,000-point threshold by losing 3.78 percent to end at 2,907.82.
The rout had sent 1,023 stocks down by the daily 10 percent limit — or more than one in four.
Telecom firms led the decline, with Eastern Communications Co Ltd off 9.96 percent to 4.70 yuan (73 US cents) and China United Network Communications Ltd shedding 6.92 percent to 4.98 yuan.
The US on Monday threatened to impose a 10 percent tariff on US$200 billion worth of Chinese goods, marking an escalation in trade tensions between the two countries.
“China’s response is to firmly safeguard the interests of the nation and its people, free trade system and common interests of mankind,” said a statement published on the official website of the Ministry of Commerce yesterday.
Nomura Securities said that “the next key date is June 30, when the US is scheduled to release investment restrictions and export controls for related Chinese persons and entities.”
“As the US-China trade conflict enters a tit-for-tat stage, we expect Beijing will adjust domestic policies given the new situation,” Nomura said.
“Recent activity data have surprised on the downside, implying end demand has been getting increasingly weaker due to rapidly shrinking credit supply from the shadow banking sector. We estimated that Beijing will make necessary adjustments and introduce easing measures.”
“Seeing the benchmark dropping below the 3,000 level hurts sentiment even more,” said Hao Hong, chief strategist with Bocom International Holdings Co in Hong Kong. “Things could get a lot worse if the trade war escalates and China fights back in an unconventional way. I would advise against buying into the selloff.”
The People’s Bank of China yesterday injected a net liquidity of 100 billion yuan into the financial market via reverse repurchase agreements, according to a statement published on its official website. The central bank also lent 200 billion yuan to financial institutions via its medium-term lending facility.