- Chinese stocks suffered their largest monthly decline since January 2016 in June.
- If the first trading day of July is anything to go by, this month could be even worse.
- The United States will introduce 25% tariffs on $US34 billion worth of select Chinese imports from Friday.
After suffering the largest monthly decline since January 2016 in June, things haven’t got much better for Chinese stocks on the first day of trading in July.
Actually, they’ve gotten significantly worse.
As seen in the scoreboard below, they suffered large and widespread losses on Monday, led by large cap stocks.
Shanghai Composite 2,775.77 , -2.52%
SSE50 2,385.91 , -3.79%
Shenzhen Composite 1,572.49 , -2.19%
CSI300 3,407.98 , -2.93%
CSI500 5,139.56 , -1.50%
Hang Seng 28,962.29 , 1.61%
USD/CNY 6.6485 , 0.47%
USD/CNH 6.6616 , 0.42%
The benchmark Shanghai Composite Index skidded 2.52% to points, leaving it at the lowest level since March 2016.
Friday’s substantial gains, seemingly arriving out of nowhere, were completely unwound and then some in what was another ugly session for investors.
From this years peak of 3,587.03 points set in Late January, the Composite has now shed 22.6%.
All sectors closed deep in the red, ranging from losses of 1% for utilities to 4% for financials. Consumer discretionary, technology, materials, telecoms and energy also lost more than 2.5%.
Real estate developers, in particular, were hammered during the session with the CSI 300 Real Estate Index tumbling 6.6% to the lowest closing level since May 2017.
Trade tensions between the Unite States and China likely explain the size of today’s losses.
As things currently stand, the United States will introduce 25% tariffs on $US34 billion worth of select Chinese imports on Friday this week. China has also announced reciprocal tariffs of 25% on the same amount of US imports.
“If tariffs and retaliatory measures are to reduce the China-US trade surplus by $US50 billion, we estimate it could slow China’s growth by around 20 to 40 basis points,” said analysts at Citibank’s emerging markets team.
“The market concerns on China’s slowdown may increase capital outflow pressures, and hence constrain the policy room to support the economy.”
Data revealing global demand for Asian manufactured goods remained weak in June may have also acted to unsettle investors.
The Chinese yuan also reversed modest gains achieved on Friday with both onshore and offshore-traded yuan currently down 0.47% and 0.42% respectively against the greenback.
The losses in Chinese markets spilled over the broader Asian region with many major indices losing more than 2%.
Australia ASX 200 6177.80 , -0.27%
NZ NZX 50 8942.47 , -0.01%
Japan TOPIX 1695.29 , -2.06%
Sth Korea KOSPI 2271.54 , -2.35%
Sinagpore STI 3234.37 , -1.05%
India Nifty 50 10622.15 , -0.86%
S&P 500 Futures 2707.25 , -0.52%
Suggesting that the selloff in Asia may extend into US trade, S&P 500 futures are currently off 0.5%.