Stocks, yuan drop on US tar­iffs move

Wash­ing­ton es­ca­lates trade row, stokes mar­ket fears

Global Times US Edition - - BIZMARKETS - By Zhang Hong­pei

The Chi­nese yuan, stocks as well as US fu­tures all slid on Wed­nes­day, af­ter US Pres­i­dent Don­ald Trump fired an­other shot in the on­go­ing trade row with China, in­ten­si­fy­ing the mar­ket’s risk avoid­ance emotions.

On Tues­day night, the Trump ad­min­is­tra­tion re­leased a list of $200 bil­lion worth of im­ported Chi­nese goods to be slapped with 10 per­cent tar­iffs, es­ca­lat­ing the cur­rent trade war be­tween the two coun­tries.

The pro­posed tar­iffs will not take ef­fect im­me­di­ately but will un­dergo a two-month re­view process by Au­gust 30, ac­cord­ing to me­dia re­ports.

How­ever, the for­eign ex­change mar­ket and stock mar­ket im­me­di­ately re­sponded to the signs of es­ca­la­tion.

The Shang­hai Com­pos­ite In­dex slid 1.76 per­cent to end at 2,777.77 points, while the blue-chip CSI300 in­dex went down 1.73 per­cent to end at 3,407.53 points.

The on­shore yuan opened at 6.6694 against the green­back, over 300 pips weaker than the pre­vi­ous night’s clos­ing. It was chang­ing hands at around 6.66 dur­ing the af­ter­noon trad­ing ses­sion.

The Peo­ple’s Bank of China (PBC), the coun­try’s cen­tral bank, set the yuan’s mid­point rate at 6.6234 per dol­lar, slightly firmer than the pre­vi­ous fix of 6.6259.

On Wed­nes­day, the deputy PBC gov­er­nor warned that Chi­nese en­ter­prises have to fur­ther en­hance their aware­ness of risk avoid­ance.

Pang Gong­sheng, also the ad­min- is­tra­tor of the State Ad­min­is­tra­tion of For­eign Ex­change, was quoted by news por­tal yi­cai.com as say­ing that some en­ter­prises are “run­ning with­out cover,” and th­ese types of ac­tions not only eas­ily make the mar­ket res­onate at the macro level, but also put th­ese en­ter­prises in wider dan­ger of ex­change rates at the mi­cro level.

US stock fu­tures were also trad­ing in the red, drop­ping be­tween 0.2 per­cent and 0.9 per­cent, with the largest de­cline seen on the Dow Jones In­dus­trial Av­er­age.

Lian Ping, an econ­o­mist with the Bank of Com­mu­ni­ca­tions, told the Global Times that in the mar­ket, re­ac­tions to such mea­sures are usu­ally the strong­est be­tween the an­nounce­ment of the tar­iffs and their im­ple­men­ta­tion, the in­ter­val of which can lead to low mar­ket ex­pec­ta­tions and bear­ish per­for­mances.

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