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Chinese market slipped after Trump’s statements

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Chinese market slipped after Trump’s statements
May 06
13:00 2019

Because of Trump’s statements to increase duties on a number of goods from China, negotiations on a trade agreement have been threatened. This also has affected the state of the Chinese stock market, which shows a sharp drop.

The Shanghai Composite Index has lost 5.6%. Such a strong rollback has not been observed since the beginning of 2016. The Shenzhen Composite has fallen by 7.4%.

The Hong Kong Hang Seng has been affected too. It has slipped by almost 3%. Also, a slight drop (0.8%) has been shown by S & P / ASX 200.

On Monday, the Japanese and South Korean markets are closed. Trump’s sensational statement was made public on Sunday. He wrote that the increase in tariffs on goods worth $ 200 billion to 25% would happen that Friday.

In addition, the US leader noted that other $ 325 billion worth of goods exported by China were not subject to duties, but soon the tariff would be extended to them too.

In addition to these statements, President Trump said that the duties on Chinese goods that had been imposed earlier were one of the reasons for the high economic performance of the United States.

“We are still negotiating with China, but the talks are slow moving because they want to change the terms. No! ”, – Mr. Trump wrote in his microblog.

Such statements were a big surprise for China. The WSJ writes that the Chinese authorities may cancel negotiations, the next round of which is scheduled for Wednesday.

Referring to the Chinese Foreign Ministry, Bloomberg reports that Chinese diplomats are still preparing to leave for Washington to take part in the talks.

Eli Lee, head of investment strategy at Bank of Singapore, comments on the situation: “We believe that the chances of failure of the US-China negotiations are 1 to 3.”

A fall of quotations is observed in all segments of the Chinese market. For example, shares of the Geely have dropped by 7%, WH Group – by 6.8%, AAC Technologies (supplier of components for Apple products) – by 6.1%.

A lot of experts now say that threats to raise duties are only a new tactic of negotiation. But Trump says that raising tariffs has helped the American economy. This can be regarded as a real intention to take this path again and curtail negotiations.

Earlier this week, the Chinese Central Bank announced that it would reduce the share of reserves for small and medium-sized banks. This is needed to stimulate lending in small businesses. The regulator noted that that step would help free up more than $ 40 billion in liquid funds. The decision comes into force on May 15.

The People’s Bank reports that the reserve ratio will be 8%. It will be relevant for banks, which assets amount to less than 10 billion yuan. The Wall Street Journal has calculated that about a thousand organizations fall under this criterion.


The material was prepared with the participation of Katya Gordon,
a leading analyst of the brokerage company CT Trade

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