China’s stocks fall to 10-week low amid trade war fears and data showing slower exports growth

Declines on Chinese stocks resumed on Wednesday, sending the benchmark gauge to its lowest level in 10 weeks, as a looming trade war and slower-than-estimated export growth renewed concerns about the resilience of the economy.

The Shanghai Composite Index dropped 1.1 per cent, or 32.63 points, to 2,893.76 at the close on Wednesday, finishing at its lowest level since February 22. A measure of stocks in Shenzhen slid 0.7 per cent. Almost US$1 trillion in market capitalisation on mainland equities has been erased since its high in April, according to Bloomberg data. Hong Kong’s Hang Seng Index sank to a six-week low.

The resumed decline in stocks followed an overnight rout in global markets amid fears that this week’s high-stake trade talks between China and the US will fall apart. Adding to the sell-off was China’s April trade data, with the 3.1 per cent export growth trailing the consensus estimate of an 8 per cent increase.

Efforts by China’s central bank to turn on the liquidity taps had little impact upon sentiment. The overnight repo rate on the interbank market, a gauge of funding availability, fell to a four-year low after the People’s Bank of China unleashed 10 billion yuan (US$1.48 billion) through reverse repurchase agreements.

“For now, the central bank’s liquidity net injection is symbolic and won’t be done in a massive way, given the talks are still going on and haven’t fallen apart completely,” said Ken Chen Hao, a strategist at KGI Securities in Shanghai. “It simply wants to send a message that it will take action once the downside pressure on the economy is increasing. But if the negotiation really falls apart, it will have a pretty negative impact on China’s economy in the long turn and will bring an end to the rally on stocks.”