Displaying items by tag: yuan
Chinese Stocks are Plunging
(Beijing)
If we think the trade war is being rough on our markets, just take a look at China. The country’s benchmark Shanghai Index is down 22% since its peak in January, and the yuan is dropping as well. In addition to Trump’s rhetoric and the threat of a trade war, China is also seeing weakening domestic economic data.
FINSUM: China is a lot more exposed to the trade war than the US. It has less broad and deep financial markets, so there are not as many places for investors to hide, and its economy is much more export-reliant, making it more vulnerable to tariffs.
The Next Big Short is Here
(Washington)
The Chinese stock market is now in a bear market and there is a great deal of pressure on its currency. Last time there was this much pressure, in 2015, the market broke, with stocks plunging and the yuan devaluing by 7% over the year. US stocks even plunged in fear. Now, the situation looks like it might occur again, causing some to call the yuan the next “big short”. The currency is already down almost 1% since Friday, and is in negative territory for the year. A burgeoning trade war with the US is adding pressure.
FINSUM: So the one big support for the yuan is the current strength of the Chinese housing market, which has been strong recently (a big contrast to 2015). That seems like it will keep a blow out from happening.
China Might Throw This Big Punch in Spat with US
(Beijing)
The US and China are currently in a hot-under-the-collar spat over trade. Each side is proposing to raise tariffs in response to the other, and there is no end in sight. Well, China may be changing gears and adding a new weapon—Yuan devaluation. Beijing is reportedly exploring how to use devaluation as a tool in a trade war. Weakening the Yuan would make Chinese goods cheaper to buy overseas and could be a tool to boost exports. At the same time, it makes it harder for Chinese companies to buy overseas goods.
FINSUM: While on paper it sounds promising, intentionally weakening the currency would give weight to claims (most loudly by Trump) that China is a currency manipulator, which could turn favor against Beijing.