World’s Second Largest Economy Faces 2.4 Trillion Loss in Stock Market in 2018

The benchmark of Shanghai Composite Index (SSEC) almost hit 25% below its starting point in 2018, making it the worst-performing major stock market in the world. The dispute in the trade war with the U.S. this year has erased $2.4 trillion (฿77.76 trillion).

China started the year pretty well as the Shanghai Composite Index climbed to its highest since 2015, but the nightmare took over once the tariff war with the U.S. began.

Even though the U.S. President Donald Trump and the Chinese President Xi Jinping came to a conclusion for a 90-day truce after their meeting at the G20 in early December, the situation did not turn out to be as good as everyone had thought as there was no in-depth detail announced to the public on what they had discussed.

To make things even worse, Canada had arrested Huawei CFO Mrs. Meng Wanzhou, who is the daughter of Huawei’s president, due to the request of the U.S. in an accusation of conspiracy to defraud multiple international institutions. Not long after the arrest, a total of two Canadians had been detained by Chinese authorities, claiming that the detainees had “engaged in activities that harm China’s national security,” while another one was detained due to visa issue.

 

China’s economic growth slowed to 6.5% in the third quarter of 2018, the slowest pace in almost a decade, and is expected to slow further next year due to the impact of the trade war with the U.S.

China’s currency has tumbled more than 5% this year. The yuan fell to the weakest in a decade in October, edged closer to the milestone of 7 per dollar, first time since the global financial crisis. The currency rebounded though, fueled by speculations the world’s two largest economies were moving closer to a deal on trade. The exchange rate has since stabilized toward the end of the year.

The People’s Bank of China has cut the reserve requirement ratio four times this year, adding so much liquidity that money market rates fell to multiyear lows in August.

While foreign investors continued to pour money into onshore equities via the stock connects and state funds were said to have bought exchange-traded funds to rescue shares, they did little to arrest declines. There was no place to hide with even the safe-havens losing ground, as the weak Chinese economy hurt spending and weighed on consumer stocks, while a vaccine scandal and a gene-editing controversy sparked a sell-off in the health-care sector.

 

The tit for tat between the U.S. and China might still go on and on until who knows? It is not only China that encountered a huge loss, global markets also faced the same thing as well, and the main factor was due to the controversial of the world’s two largest economies. Let’s hope China and the U.S. solve their problem soon, so that the rest of the world will receive their merit as well.