Shanghai benchmark retreats to five-month low as US and China up the ante in trade war
- Mainland equities fall after Beijing halts purchases of American agricultural goods and Washington labels China as a currency manipulator
- Hong Kong stocks trim losses after key Beijing officials say city’s government ‘completely capable’ of protecting law and order
China’s stocks dropped to the lowest level in five months after the US designated the Asian nation as a currency manipulator and Beijing suspended procurement of American agricultural products as the trade war flared up between the world’s two largest economies.
The Shanghai Composite Index fell 1.6 per cent to 2,775.14 on Tuesday, with the benchmark capping a 5.9 per cent, five-day loss and closing at the lowest level since February 21. Hong Kong’s Hang Seng Index lost 0.7 per cent to 25,976.24, clawing back an intraday loss of as much as 2.9 per cent, as Beijing’s top policy office on the city’s matters held a second press conference since protests began on June 9.
The escalating tension between China and the US roiled financial markets across the world in overnight trading, sending stocks from New York to Europe plunging and prompting traders to take shelter in gold.
The US Treasury Department officially labelled China as a currency manipulator after the yuan weakened below 7 against the US dollar on Monday, which was seen as a countermeasure taken by Beijing against the imposition of new tariffs on US goods. Meanwhile, China said it had suspended buying US farm produce and might levy tariffs on goods bought after August 3.
Wang Zheng, chief investment officer at Jingxi Investment Management in Shanghai, said the new developments in the trade war surprised investors, as both sides have taken a hardline stance. “The outlook of the stock market is quite bleak, given there’s no sign of a detente,” he said.