Shanghai stocks slump on trade war jitters

SHANGHAI stocks tumbled nearly 4 percent yesterday to a two-year low, while the yuan fell to a more-than-fivemonth low against the dollar as Washington’s fresh tariff threats against China raised the spectre of a full-blown trade war.

The equity slump, which comes despite a surprise liquidity injection by the central bank, risks triggering a downward spiral that could derail Beijing’s bid to lure large international listings, particularly from hi-tech giants.

The Shanghai Composite Index plunged more than 5 percent at one point in late trade before finishing the session down 3.8 percent at 2 907.82 points. The blue chip CSI300 index fell 3.6 percent to 3 621.12.

The yuan weakened to a low of 6.4754 in afternoon trade, the weakest since January 12, while China’s benchmark 10-year treasury futures jumped, as bond yields fell.

“It’s the darkest hour and the most agonising moment in the first half of this year. There are disaster victims everywhere,” Zhang Yidong, strategist at Industrial Securities, wrote in a note yesterday.

Zhang said investors faced the triple whammy of the Sino-US trade spat, Beijing’s regulatory crackdown on riskier lending practices and tighter global liquidity.

Stirring memories of the 2015 equity market crash, more than 1 000 stocks slumped by their 10 percent daily limit as Chinese investors dumped stocks across the board, which sent jitters through China’s retail investment community.

“It will have a big effect on us normal people,” said Gu Xiaoliang, a 31-year-old personal investor, who was watching market prices at the entrance of the Shanghai Stock Exchange in the city’s financial district.

“As an investor, I’m not optimistic with my investments. Right now, I don’t have clear judgment so I’m just going to wait and see.”

Shanghai-based hedge manager David Dai said the rapidly escalating trade tensions between Washington and Beijing had added woes to an already fragile stock market and made calling the bottom very difficult.

Yesterday, China’s commerce ministry said the country would take “qualitative” and “quantitative” measures, and “fight back firmly” against additional tariff measures by the US government.

China’s central bank pumped 200 billion yuan (R428bn) into the banking system via its medium-term lending facility yesterday but it failed to mollify investors.

Hong Kong’s Hang Seng index dropping nearly 3 percent to its lowest in six months.