China Market falls as trade war escalates

Headline indices of the Mainland China equity market skidded further on Tuesday, 14 May 2019, as risk off selling continued due to escalating Sino-U.S. trade tensions after China announced tariff increases on $60 billion of U.S. goods on Monday in retaliation for Washington imposing higher tariffs on $200 billion of imports from China on Friday. Market losses were, however, capped on suspected state-backed buying and reports that President Donald Trump had voiced hope for progress in the countries' trade negotiations. At closing bell, the benchmark Shanghai Composite Index dropped 0.69%, or 20.10 points, to 2,883.61. The Shenzhen Composite Index, which tracks stocks on China's second exchange, shed 0.62%, or 9.68 points, to 1,542.07. The blue-chip CSI300 index sank 0.64%, or 23.58 points, to 3,645.15.

Selling has intensified for local shares on Tuesday with the escalation of US-China trade tensions. China announced Monday that it will raise tariffs on $60 billion worth of U.S. goods, beginning on June 1. The goods targeted include a broad range of agricultural products. Last week, U.S. President Donald Trump raised duties on $200 billion in Chinese goods to 25% from 10%.

Earlier, Trump said he would meet Chinese President Xi Jinping at a G20 summit in late June, reigniting hopes for an agreement. Trump also said on Monday that he has not made a decision to go ahead with threatened tariffs on another $325 billion in goods from China. His comments came after China announced on Monday higher tariffs on $60 billion of U.S. goods, effective June 1, in retaliation for Washington's decision last week to hike levies on $200 billion in Chinese imports.

CURRENCY NEWS: China's yuan slumped against the U.S. dollar on Tuesday, inline with China's central bank softer midpoint fixing. The onshore yuan weakened 0.1% to its lowest level since Dec. 27, 2018 in late afternoon trade, and stood at 6.8854 per dollar at the close, after the Chinese foreign ministry said it hopes the United States does not underestimate its determination to protect its interests. The offshore yuan climbed off a four-month low following Trump's remarks on prospects for a trade deal, but later erased most of its intraday gains as the onshore market faltered.

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