Shanghai (AFP) – Shanghai and Hong Kong stocks plunge on Tuesday on investors’ fears that the US and China could be heading for a full-blown trade war following tit-for-tat tariff threats.
The plummet follows an announcement Monday by US President Donald Trump that he planned to hit the world’s second largest economy with 10 percent levies on $200 billion worth of imports — a move Beijing labelled “blackmail”, threatening to respond in kind.
As the words flew, the benchmark Shanghai Composite Index ended down 3.78 percent, or 114.08 points, at 2,907.82 while Hong Kong was 3.12 percent lower in late afternoon trade.
The Shenzhen Composite Index, which tracks stocks on China’s second exchange, was also down, dropping 5.77 percent, or 97.60 points, to 1,594.05 on turnover of 232.5 billion yuan.
It is the first time the Shanghai index has dipped below 3,000 since September 2016, according to Bloomberg.
Qian Qimin, an analyst of Shenwan Hongyuan Group, said that the number was a psychological threshold for investors.
“Now the defence line has been broken. People are panicking and we are seeing some irrational behaviours,” Qian said.
“The market is really weak right now and there is still uncertainty.”
“Investors are worried the US may impose further restrictions on Chinese tech and Internet products and cause greater uncertainty for the domestic economy,” Zhang Gang, Shanghai-based strategist with Central China Securities Co, told Bloomberg News.
“The Shanghai Composite is unlikely to bottom out any time soon.”