HONG KONG/SHANGHAI, Oct 13 (Reuters) – Chinese stocks fell sharply on Monday amid trade volatility as the renewed trade war between Washington and Beijing dented risk appetite and spurred profit-taking, dragging stocks from decade highs.
Register here.
“President Trump has reminded everyone that there is a lot of uncertainty for the markets,” said Ben Bennett, head of investment strategy for Asia at L&G Asset Management, based in Hong Kong.
He expects short-term swings in Chinese stocks after the strong rally in recent months.
“I think the market is probably trying to digest how long this saga is going to last…so that’s the kind of unknown that I think leaves the market on edge and very fragile at the moment,” said Oriano Lizza, a salesman at CMC Markets in Singapore.
VOLATILITY POINTS
Chinese 10-year bond futures rose on Monday, indicating a rush to safe havens. The yuan recovered some of the losses following Trump’s announcement on Friday, helped by tighter guidance from the central bank.
At the same time, investors and analysts say the selloffs will likely be less severe than the panic selling seen in April, when Trump launched a global trade war with drastic tariffs across the board.
Wang Yapei, a Shanghai-based hedge fund manager, expects the turmoil to be short-lived, betting that China and the United States will eventually negotiate because “the cost of large-scale conflict is too high for both powers.”
“This is a de-escalation measure that will cushion the decline in Chinese markets,” said Hong Hao, chief investment officer at Lotus Asset Management.
Investors should abandon growth stocks in favor of value stocks in the coming weeks, he added.
Trump appeared to seek to ease tensions in a social media post overnight, saying “the United States wants to help China, not hurt it.”
Charles Wang, chairman of Shenzhen Dragon Pacific Capital Management Co, said growing geopolitical uncertainty means China will likely ease monetary policy further to support economic growth and support stocks.
TACO AGAIN?
“Any correction would give long-term investors a chance to buy the shares at lower prices,” the brokerage said.
But Trump’s proposed 100% tariff hike would hurt export-oriented sectors such as electric motors, electrical equipment and nuclear reactors, according to Xiangcai Securities.
Many analysts, however, believe the chances of a three-digit tariff are slim.
“This statement is more in line with Trump’s typical negotiating tactic: applying maximum pressure to strengthen bargaining leverage and forcing concessions during trade negotiations,” Changjiang Securities said in a report. “It will probably play out again as TACO (Trump Always Chickens Out).”
Lu Ting, Nomura’s chief China economist, said continued economic and trade clashes between the two superpowers were inevitable.
“However, in the short term, the two sides are still dependent on each other…so we believe this latest escalation is more about posturing for upcoming negotiations and meetings,” he said, seeing “a decent chance” of an in-person meeting between Xi and Trump at the annual APEC summit in South Korea later this month.
Reporting by Summer Zhen in Hong Kong and Samuel Shen in Shanghai, additional reporting by Rae Wee; Editing by Sam Holmes
Our Standards: The Thomson Reuters Trust Principles.
