Stock market news: China slumps ahead of Trump Xi summit

An
investor looks at an electronic board showing stock information
at a brokerage house in Shanghai, China, July 10,
2015.
Reuters

• Chinese stocks slumped into the weekend Friday, ahead
  of a crucial week in the future of the trade war between
  Beijing and Washington.
• The Shanghai Composite, China’s benchmark share index,
  dropped just shy of 2.5% of its value on the day, while the
  Shenzhen Composite was 3.3% lower.
• “The decline in the market on Friday implies that
  investors are nervous that the two leaders won’t come to an
  amicable agreement,” Russ Mould, investment director at AJ Bell
  said in a note on Friday morning.

Chinese stocks slumped into the weekend Friday, ahead of a
crucial week in the future of the trade war between Beijing and
Washington.

The Shanghai Composite, China’s benchmark share index, dropped
just shy of 2.5% of its value on the day, driven by investor
jitters about the trade war ahead of next week’s G20 meeting in
Buenos Aires, Argentina.

During that event,
President Donald Trump and President Xi Jinping will hold a
bilateral meeting to discuss future trade between the two
countries.

Investors are worried that Xi and Trump’s meeting will be
ultimately fruitless, and lead to the continued imposition of
tariffs on more than $300 billion of goods flowing between the
two countries.

“The decline in the market on Friday implies that investors
are nervous that the two leaders won’t come to an amicable
agreement,” Russ Mould, investment director at AJ Bell said in a
note on Friday morning.

While the Shanghai Composite dropped significantly, it was not
China’s worst-performing index on the day: the Shenzhen Composite
lost 3.3%. Other major indexes also saw sharp drops, with the Dow
Jones Shanghai down 2.5%, and the China A50 off 1.5%.

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Friday’s falls in Chinese stocks add to a horrible year for the
country’s equity investors. Chinese stocks have fallen the most
of any major economy in 2018, with the Shanghai Composite down
around 30% from the start of the year.

While the trade war has been an important factor in that slump,
fears about growth in the world’s second largest economy have
also played a major part. Numerous major institutions have warned
of worrying trends in the Chinese economy, with the
ratings agency S&P Global in
October highlighting a hidden debt pile in the country worth as
much as $6 trillion.

The
phenomenon of forced selling is also helping push the country’s
stock market lower.

In China, hundreds of companies use their shares as collateral
for loans, but when share prices fall they are forced to sell to
maintain balance in brokerage accounts, used to lend the
companies money. This exacerbates market falls, and has been
blamed by some commentators for the major slump this year.