Shanghai Indexes Trade Down Amid Rising Trade Tensions Between the U.S. and China

Li Chen
15 May, 2024
Hong Kong

Stock market indexes in Shanghai traded down amid rising tensions between China and the U.S. 

Markets in Hong Kong are closed to celebrate the birthday of the Buddha.

Chinese authorities said they will take appropriate measures to defend the interests of their corporations after U.S. President Joe Biden approved a sharp increase in tariffs on electric vehicles, solar panels, batteries, and other renewable energy products imported from China. 

The overall impact of the tariffs is expected to be minimal, but the worsening of the tone and growing trade uncertainty are likely to force Chinese companies to relocate manufacturing away from China and closer to its major international markets. 

The U.S. move is going to alter the global supply chain in several industries as Chinese companies seek to relocate manufacturing to Mexico and Hungary, taking advantage of regional trade zones to access the U.S. and European markets. 

The People's Bank of China held its key one-year lending rate at 2.5%, and the central bank launched the sale of 125 billion yuan bonds for financial institutions at the unrevised rate on Wednesday. 

Market sentiment has been positive over the last three months after benchmark indexes in Shanghai and Hong Kong rebounded from the lows of February 16. 

Last month, China's politburo announced its plans to release market-supportive measures and encouraged state-controlled financial institutions to increase exposure to Chinese stocks. 

The announcements supported the three-month rally that lifted the Hang Seng index by more than 20%, but investors have been increasingly doubting the rally's durability after the authorities failed to follow up with specific steps to revive the moribund property market and improve consumer confidence. 

Moreover, rising tensions between the U.S. and China also contributed to caution in stock trading this week. 

 

China Stock Movers 

The CSI 300 index fell 0.3% to 3,647.19 and the Hang Seng index decreased 0.2% to 19,073.71 in Tuesday's trading. 

Electric vehicle makers were in focus amid rising tensions between the U.S. and China. 

Dongfeng Motor, BYD, and FAW Jiefang Group declined between 1% and 3%. 

Tongwei Co. declined 1.5% to 22.34 yuan in Shanghai trading. 

Banks were in focus after the People's Bank of China held its one-year medium-term lending rate at 2.5%. 

Bank of China, China Merchants Bank, Agriculture Bank of China, and ICBC gained between 0.1% and 1.3%.