12 Jun

Asian Markets Turn Bearish as China Says Its Not Afraid to Fight

WRITTEN BY Mayur Sontakke, CFA, FRM

Trade war here to stay?

Yesterday, Asian markets largely shrugged off Trump’s comments about imposing fresh tariffs if he and Xi Xingping don’t meet in China. Markets in fact rose as China seemed to be opening its purse for infrastructure spending to boost economic growth. For the first two days of the week, it didn’t feel like we were living in the shadows of a trade war between the world’s two biggest economies.

Then, yesterday China’s Foreign Ministry Spokesperson, Geng Shuang, indicated China is not afraid to fight a trade war even though the country doesn’t want to. He reiterated that China is ready to fight until the end.

China’s Inflation

Today, China’s National Bureau of Statistics released May’s inflation numbers. China’s consumer price inflation came in at 2.7% on a year-over-year basis in May. However, the consumer prices remained stable over April. Producer prices remained soft with a 0.6% year-over-year increase in May.

Chinese indexes

China’s benchmark Shanghai Composite Index closed 0.56% lower today. The index gave up early gains to fall before the lunch break. After that, the index remained choppy. The tech-heavy Shenzhen Component lost 0.92% today.

China-focused ETFs and Chinese stocks

The iShares MSCI China ETF (MCHI) gained 1.41% yesterday. The ETF underperformed the Shanghai Composite’s 2.58% gains yesterday. The iShares China Large Cap ETF (FXI) gained 1.12% yesterday. Xtrackers Harvest CSI 300 China A-Shares ETF (ASHR) was the biggest gainer among the three with a 2.51% rise.

Among the major Chinese stocks listed in the US, JD.com gained 2.71% yesterday but was down 1.07% at 4:21 AM EDT today in pre-market trading. Alibaba (BABA), which gained 1.75% yesterday, was down 1.15% in pre-market trading at 4:35 AM EST today. Both JD.com and Alibaba are a part of the iShares MSCI China ETF.

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