Chinese stocks slumped as fears of worsening Sino-American tensions further undermined investor confidence after a slew of disappointing economic developments.
Chinese ADRs and ETFs fell in morning trading. YINN fell 10%; Tencent Music, Nio fell 9%; XPeng fell 8%; JD.com, Li Auto fell 6%; PDD fell 4%; Alibaba fell 3%.
US President-elect Donald Trump is poised to pick two men with track records of harshly criticizing China for key positions in his new administration. That bolstered concerns over geopolitical tensions. Sentiment had already been cooling with China’s underwhelming fiscal stimulus announcement last week and a slower-than-expected credit expansion for October.
“Trump’s preference to strengthen his negotiating positions with aggressive appointments like these should not be a surprise,” but underscores the high likelihood of the president-elect following through on his campaign pledge to implement punitive tariffs on China’s exports to the US, said Homin Lee, senior macro strategist at Lombard Odier.
Senator Marco Rubio — who has taken an aggressive stance on China’s emergence as an economic power and twice been hit with sanctions by Beijing — is expected to be named secretary of state, Bloomberg News reported. Representative Mike Waltz, who views China as a “greater threat” to the US than any other nation, is in line to be national security advisor.
JPMorgan analysts said buying in Chinese stocks centered around Beijing’s plan for more stimulus was likely to resume later in November as the country outlines plans for more fiscal support.
Chinese markets retreated in recent sessions after investors were largely underwhelmed by Beijing unlocking 10 trillion ($1.6 trillion) in new debt to support the economy, given that markets were holding out for more targeted fiscal measures.
But JPM said that signals from the government suggested such targeted measures were on the way, along with “likely supports to technological development and social security.”
Trading in stocks around domestic stimulus favored high-beta domestic consumption, property, and financial proxies, JPM said, and was likely to pick up by late-November, especially as investors positioned for the Central Economic Work Conference in December.
China’s Politburo is also set to meet in December.
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