The Trump Effect: China’s Stock Markets Feeling ‘Extreme Pain’
$DIA, $SPY, $QQQ, $RUTX, $DJSH, $VXX
Tuesday’s stock market plunge shocking Chinese investors.
China’s benchmark equity gauge sank almost 5% at one point and by the close, the escalating tensions with the US pushed 1,023 stocks ‘lock limit’ down by 10% on the day, that is 25%+ of the exchange listings.
Investors are worried a trade war will act as a brake on China’s economy and hammer an already deflating equity market.
Seeing the benchmark DJSH dropping below the 3,000 psych mark hurts sentiment even more. Things could get a lot worse if the trade war escalates and China fights back in an unconventional way.
We do not advise against buying into the selloff.
Tuesday China said it will retaliate “forcefully” after President Donald Trump threatened duties on $200-B in Chinese imports, and another $200-B after that if Beijing retaliates.
It follows last week’s publication of the US’s final list of $50-B in tariffs, and China’s statement over the weekend that all recent agreements on trade would become void.
While the Shanghai Composite Index now trades at less than 11X projected earnings, its cheapest relative to global shares since early Y 2015, there are few bargain hunters lurking.
It’s too early to call the bottom in Mainland equities.
Investors were surprised that President Trump changed his attitude, they expected a good result after the Singapore Summit and the Chinese government’s favorable monetary policy.
Traders had speculated that China’s so-called national team would be committed to defending the 3,000 mark, which proved to be a Key level of support for stocks at the beginning of last year.
With little sign of state intervention, Bearish sentiment will persist, even as the Shanghai Composite closed at a technical level that may signal it fell too far, too fast, the pain is extreme.
Tuesday, the major US stock market indexes finished at: DJIA -287.26 at 24700.21, NAS Comp -21.44 at 7725.60, S&P 500 -11.30 at 2762.33
Volume: Trade on the NYSE came in at 981-M/shares exchanged
- NAS Comp +11.9% YTD
- Russell 2000 +10.3% YTD
- S&P 500 +3.3% YTD
- DJIA-0.1% YTD
HeffX-LTN’s US Major Stock Market Indexes Technical Analysis
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