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Asian markets brush off trade tensions

Asian markets brush off trade tensions

Asian stock markets finished a turbulent week on a high note with notable gains during the final trading session, though they were not enough to erase significant losses recorded in previous days.

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By Staff Journalist 09.07.2018

Asian stock markets finished a turbulent week on a high note with notable gains during the final trading session, though they were not enough to erase significant losses recorded in previous days. 

The week featured simmering trade tensions between the United States and China, and Friday finally saw the deadline pass as tariffs on $34bn of Chinese imports came into effect. China responded in kind with levies on American goods.

These are the first blows in a commercial battle that could run for some time, with analysts fearing that the spat could rock largely stable global markets and cramp businesses around the world. Beijing said on Friday that the Trump administration had violated WTO rules by triggering “the largest trade war in economic history to date”.

Asian markets did not suffer on Friday, though there were losses early in the session. The benchmark Shanghai Composite made ground late and ended at 2,746.48, a 0.46% uptick. The smaller Shenzhen Composite tracked on a similar level, recovering to increase by 0.48%.

Continuing the upward trend, most sectors in Japan climbed after three consecutive sessions of declines. The Nikkei 225 eventually closed out at 21,788.14 for a 1.12% rise. Hong Kong’s Hang Seng Index also tracked upward to end the day at 28,313.74, a 0.47% increase on the earlier session.

Singapore’s Straits Times Index was the biggest loser on Friday, tumbling by 2.35% as the government’s round of property cooling measures had a negative impact on real estate and hauled the benchmark lower. In contrast, South Korea’s Kospi finished well to rise 0.68%, while Australia’s S&P/ASX 200 saw a 0.91% hike to close at 6,272.30.

Following the stressful few days, investors and analysts will be watching closely for potential developments in the trade standoff between the world’s two biggest economies. The Trump administration has already signaled its intent to introduce tariffs for a further $16bn of Chinese products within the next two weeks and has floated the idea of extending duties to an additional $500bn worth of goods.

China said that it would not fire the first shots in any trade conflict, but the Commerce Ministry said on Friday that it was “forced to retaliate” to “defend the core interests of the country and the interest of the people”. Chinese levies targeted goods such as poultry, pork, corn and soybeans.

Foreign companies have been vocal in their frustration at Chinese trade practices in the past, but US enterprises have regularly stated in recent weeks that any trade conflict could do more harm than good. William Zarit, Chair for the American Chamber of Commerce in China, said: “There are no winners in a trade war.”

He added: "While our 900-member companies continue to suffer from not having a level playing field in China, they are still extremely clear: increased tensions in the US-China economic relationship will negatively impact their operations in China.”

The trade war has already weighed on investor sentiment in Asian markets, as shown by the successive losses last week and the fact that the Shanghai Composite is now in bear market territory. CICC Chief Economist Liang Hong said that recent weakness on the mainland may also be due to tighter liquidity.

There were positive signs on Friday, but ADS Securities Head of Research Konstantinos Anthis urged investors to be cautious. He added: “Equities in Asia are trading in a sea of green, taking Donald Trump’s trade tariffs against China in their stride. Whether this is a sign of complacency or a suggestion that investors have grown accustomed to this continued spat remains to be seen, but in any case, caution is advised.”

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