(Bloomberg) — Chinese stocks and the yuan fell as fears of worsening Sino-U.S. tensions further undermined investor confidence following a slew of disappointing economic developments.
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The Hang Seng China Enterprises Index fell 3.1%, paring its biggest single-day loss in almost a month. The onshore benchmark CSI 300 Index fell 1.1%. The offshore yuan fell as much as 0.4% to 7.2534 per dollar, the weakest in more than three months.
Stock losses widened in the afternoon on reports that newly-elected US President Donald Trump is set to choose two men with track records of sharply criticizing China for key positions in his new administration. That reinforced concerns about geopolitical tensions. Sentiment had already cooled following last week’s disappointing Chinese fiscal stimulus announcement and slower-than-expected credit expansion for October.
“Trump’s preference to strengthen his negotiating positions with aggressive appointments like this should come as no surprise,” but underlines the strong likelihood that the president-elect will follow through on his campaign promise to impose punitive tariffs on Chinese exports to the US, Homin said Lee. , senior macro strategist at Lombard Odier.
Senator Marco Rubio — who has taken a hawkish stance on China’s rise as an economic power and has been twice hit with sanctions by Beijing — is expected to be named secretary of state, Bloomberg News reported. Rep. Mike Waltz, who sees China as a “greater threat” to the U.S. than any other country, is poised to become national security adviser.
Chinese stocks have struggled to regain traction after peaking in early October, with the economic recovery remaining shaky and the government reluctant to roll out large-scale fiscal stimulus to revive domestic demand.
At a much-anticipated legislative meeting last week, authorities focused on solving local governments’ debt problems and stopped short of unleashing new policies to boost consumption. The outcome disappointed some investors who had hoped for stronger economic support, especially given the threat of higher tariffs under Trump.
Some traders could also take money off the table as the market outlook remains unclear. Major onshore benchmarks, including the CSI 300 Index and the Shanghai Composite Gauge, are trading around the overbought level.
