Month: March 2025

CN20250331-Can China’s Stock Market Withstand the Global Selloff Triggered by U.S. Tariffs?

A Volatile Market Shaken by Tariff Wars

The ongoing tariff war initiated by the United States has thrown global financial markets into turmoil. As economic uncertainties mount, stock markets worldwide have been hit by a wave of sharp declines. Investors are now left wondering: Can China’s A-shares remain resilient amid this global selloff?

1. U.S. Stocks Lead the Downturn as Tariff Fears Escalate

With a crucial tariff deadline approaching on April 2, fears of sweeping U.S. import taxes have unsettled markets. Investors are on edge, leading to widespread panic selling. Last Friday, all three major U.S. indices plunged—

  • Dow Jones Industrial Average fell 1.69%, barely holding onto a critical support level.
  • Nasdaq dropped 2.7%, and
  • S&P 500 slid 1.97%, both breaking below key moving averages.

2. A New Wave of Tariff Threats Looms This Week

Markets are bracing for another turbulent week as Washington shows no signs of easing its tariff policies. Adding to investor anxiety, the U.S. has threatened secondary sanctions on oil imports from Iran and Russia. If enforced, countries purchasing Russian crude could face 25%-50% additional tariffs on their exports to the U.S., worsening the fragile global trade environment.

3. Global Markets Plunge as Panic Spreads

The tariff-driven selloff has had a ripple effect across the world:

  • Chinese U.S.-listed stocks plummeted 3.33% last Friday.
  • European markets saw broad-based declines.
  • Nikkei 225 fell nearly 4%, while South Korea’s KOSPI dropped 3%.
  • Hong Kong’s Hang Seng Index showed relative resilience, limiting losses to 1.3%.

4. Government Policy Support Aims to Stabilize Markets

Amid the turbulence, China is deploying financial measures to cushion the impact. Over the weekend, the Ministry of Finance announced the issuance of 500 billion yuan in special treasury bonds to bolster the core capital of China’s four major state-owned banks. This move is expected to inject stability into the economy and provide much-needed support for the financial sector and broader A-share market.

5. A-Shares Struggle to Escape the Global Downtrend

Despite policy support, China’s stock market today morning could not escape the global risk-off sentiment. As of the midday close:

  • Shanghai Composite Index fell 0.97%
  • Shenzhen Component Index dropped 1.66%
  • ChiNext and STAR Market indices lost 1.82% and 1.65%, respectively.

Market breadth remains weak, with only 599 stocks rising versus a staggering 4,749 decliners. Trading volume remains subdued, signaling investor caution as they await the final outcome of U.S. tariff decisions.

6. A Turning Point Ahead?

Despite the bearish sentiment, policy-driven support could trigger a market turnaround. Historically, state-backed funds have stepped in during critical market downturns. With April shaping up as a pivotal month, a potential reversal may be in the cards. As the dust settles on the tariff issue, renewed investor confidence and government interventions could set the stage for a market rebound.

Will A-shares weather the storm or succumb to the global selloff? The coming weeks will provide the answer.

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CN20250306-Dollar Plummets, But Nasdaq Golden Dragon Index Surges 6.46% Overnight

1. The U.S. Dollar Takes a Deep Dive!

Amid rising trade tensions, the U.S. dollar has suffered a sharp decline. Since March 3, when the U.S. announced new tariffs on Mexico, Canada, and China, the dollar has dropped for three consecutive days, with a total loss exceeding 3%. Last night alone, it plunged over 1%.

This drop is significant—historically, a 10% decline in the dollar is enough to offset the impact of a 10% tariff on global trade.

2. What Happens Next?

Such a sharp short-term decline in the dollar is rare. In the past five years, similar events have only occurred twice:

  • March 25-27, 2020: The U.S. Dollar Index fell 3.45%, triggering a bull market in both U.S. and Chinese equities—the largest A-share rally since 2015.
  • November 2022: The A-share market bottomed at 2,886 points, and U.S. stocks entered a major tech-driven bull run.

Could history be repeating itself?

3. Chinese Stocks Are Soaring!

Last night, U.S. stocks found support after reports surfaced that the U.S. may temporarily lift auto tariffs on Mexico and Canada for one month. The Nasdaq, S&P 500, and Dow Jones all rebounded by over 1%.

However, Wall Street is growing cautious about the tech sector, fearing a potential bubble burst. As a result, investors are shifting their focus to Chinese stocks. The Nasdaq Golden Dragon China Index skyrocketed 6.46% overnight, reflecting a surge in interest.

4. A-Shares Follow Suit!

Riding the momentum from Wall Street, China’s A-share market opened higher and continued climbing throughout the morning session:

  • Shanghai Composite Index: +1.06%
  • Shenzhen Component Index: +1.75%
  • ChiNext Index: +2.15%
  • STAR Market Composite Index: +3.03%

Technology-heavy stocks led the charge, with the STAR 50 Index jumping 3.52%, fueled by explosive gains in the AI and computing power sectors.

5. Capital Floods In!

Investor enthusiasm is back. By midday, total market turnover surged past ¥1 trillion ($1.17 billion), an increase of ¥223.7 billion from the previous day. Funds are rushing in, positioning ahead of a potential breakout beyond 3,400 points.

Market breadth was overwhelmingly positive:

  • 4,407 stocks gained, while only 833 stocks declined.
  • Just 99 stocks fell more than 3%, while 856 stocks surged at least 3%.

Spring Rally Incoming?

The Chinese financial regulator recently approved an additional ¥60 billion in insurance funds to enter the market on March 4, bringing the year-to-date total to ¥112 billion. This is just the beginning of long-term capital inflows.

With a major policy meeting set to conclude next week, a fresh wave of pro-growth measures could be on the horizon. The market is poised for a spring rally—will A-shares ride the tailwind?