US-China Trade War Hits Asian Stocks for the Third Session

Asian stocks fell for the third consecutive session on Monday as the trade war between the US and China continued to deepen.

MSCI's broadest index of Asia-Pacific shares outside Japan declined 0.7 percent to $530.90, while Japan’s Nikkei 225 was down by 0.5 percent to ¥22,721.50, but trade may be subdued because of a US market holiday on Monday. The TOPIX edged lower by 0.8 percent to ¥1,720.31.

Hong Kong’s Hang Seng slipped 0.7 percent to HK$27,672.50, while South Korea’s KOSPI shed 0.6 percent to ₩2,307.03.

The Shanghai Composite index, which lost 5.3 percent in August due to concerns over the trade war, dropped 0.1 percent to CN¥2,720.74 after hitting a 2-1/2-year low of CN¥2,653 a couple of weeks ago.

Strategist Shenshen Wan stated that the markets tend to think ahead and unless the trade war anxiety is dispelled, the possibility of shares falling further cannot be ruled out just yet.

US-China Trade War

The US-China trade war continued to put markets under pressure, with US President Donald Trump ready to impose tariffs on $200 billion in Chinese imports as soon as a public-comment period on the plan concludes on Thursday.

The move would add more fuel to the already-heated conflict as the US had already employed tariffs on $50 billion of exports from China.

Chief investment strategist Norihiro Fujito said it seems almost certain that US President Donald Trump will proceed with imposing 25 percent tariffs on $200 billion worth of imports from China.

Companies and members of the public have until September 6 to submit comments on the planned tariffs, which cover everything from selfie sticks to semiconductors.

A major escalation of the battle could harm China’s growth prospects. The world’s second largest economy is expected to cool down in the coming months, as the US ramps up tariffs on its goods which could result in more spending and other growth boosting strategies from Beijing.

A private survey released on Monday showed manufacturing activity in China has hit a 14-month low in August, with export orders weakening for the fifth month.

China Purchasing Manager’s Index (PMI) fell to 50.6 in August from 50.8 in July. The result stayed above the 50-point level that separates growth from contraction for the 15th consecutive month, but it was the weakest since June 2017.

Even though China’s economy already showed signs of a slowdown before the US trade spat began, consecutive reports of declining export orders suggest the deepening trade dispute is now further increasing that pressure, with the impact beginning to affect the country’s factory segment.

New export orders, which act as an indicator of future activity, have contracted for the longest period since the first half of 2016.

Meanwhile, economic US data is due to release later this week, with manufacturing and employment expected to show positive figures that may possibly shore up US shares. Manufacturing data will be presented on Tuesday, while employment report will be on Friday.

Fujito said US shares and only and handful of countries are likely to continue to attract global funds.

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