Chinese stocks plunge into the weekend as investors sweat ahead of Trump and Xi's crucial meeting

  • Chinese stocks slumped into the weekend Friday, ahead of a crucial week in the future of the trade war between Beijing and Washington.
  • The Shanghai Composite, China’s benchmark share index, dropped just shy of 2.5% of its value on the day, while the Shenzhen Composite was 3.3% lower.
  • “The decline in the market on Friday implies that investors are nervous that the two leaders won’t come to an amicable agreement,” Russ Mould, the investment director at AJ Bell, said in a note on Friday morning.

Chinese stocks slumped into the weekend Friday, ahead of a crucial week in the future of the trade war between Beijing and Washington.

The Shanghai Composite, China’s benchmark share index, dropped just shy of 2.5% of its value on the day, driven by investor jitters about the trade war ahead of next week’s G20 meeting in Buenos Aires, Argentina.

During that event, President Donald Trump and Chinese President Xi Jinping are set to hold a bilateral meeting to discuss trade between the two countries.

Investors are worried that the meeting will be fruitless and allow the continued imposition of tariffs on more than $US300 billion of goods flowing between the two countries.

“The decline in the market on Friday implies that investors are nervous that the two leaders won’t come to an amicable agreement,” Russ Mould, the investment director at AJ Bell, said in a note on Friday morning.

While the Shanghai Composite dropped significantly, it was not China’s worst-performing index on the day: The Shenzhen Composite lost 3.3%. Other major indexes also saw sharp drops, with the Dow Jones Shanghai down 2.5% and the China A50 off 1.5%.


Read more:
US companies are using an ingenious method to game the system and avoid the worst of Trump’s trade war

Friday’s falls in Chinese stocks add to a horrible year for the country’s equity investors. Chinese stocks have fallen the most of any major economy’s in 2018, with the Shanghai Composite down about 30% this year.

While the trade war has been an important factor in that slump, fears about growth in the world’s second-largest economy have also played a major part. Numerous major institutions have warned of worrying trends in the Chinese economy, with the ratings agency S&P Global in October highlighting a hidden debt pile in the country worth as much as $US6 trillion.

The phenomenon of forced selling is also helping push the country’s stock market lower.

In China, hundreds of companies use their shares as collateral for loans, but when share prices fall they are forced to sell to maintain balance in brokerage accounts, used to lend the companies money. This exacerbates market falls and has been blamed by some commentators for the major slump this year.

NOW WATCH: Money & Markets videos

Business Insider Emails & Alerts

Site highlights each day to your inbox.

Follow Business Insider Australia on Facebook, Twitter, LinkedIn, and Instagram.