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Chinese stocks fell on Friday late in the week, in anticipation of a crucial week for the future of the Beijing-Washington trade war.
The Shanghai Composite, China's benchmark stock index, lost 2.5% of its value that day, driven by investor anxiety over the trade war that will precede the summit of the country. G20 Buenos Aires, Argentina, next week.
At this event, President Donald Trump and President Xi Jinping will hold a bilateral meeting to discuss future trade between the two countries.
Investors fear that the meeting between Xi and Trump will ultimately be fruitless and lead to the continued imposition of tariffs on more than $ 300 billion of goods moving between the two countries.
"The Friday market downturn involves worried investors as the two executives fail to reach an amicable agreement," said Russ Mold, director of investment at AJ Bell, in a note on Friday morning.
Although the Shanghai Composite fell significantly, it was not China's weakest index that day: the Shenzhen Composite lost 3.3%. The other major indices also fell sharply, with the Dow Jones Shanghai down 2.5% and China A50 down 1.5%.
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Friday's fall in Chinese equities adds a horrible year for the country's equity investors. Chinese stocks fell the most in all major economies in 2018, with the Shanghai Composite down about 30% from the beginning of the year.
Although the trade war was a major factor in this crisis, fears about the growth of the world's second largest economy also played a major role. Many large institutions have warned of worrying trends in the Chinese economy. The S & P Global rating agency, in October, has highlighted a hidden debt in the country worth up to $ 6 trillion.
The phenomenon of forced selling also contributes to the downturn in the country's stock market.
In China, hundreds of companies use their shares as collateral for loans, but when the stock price drops, they are forced to sell to maintain the balance of brokerage accounts, used to lend money. money to businesses. This exacerbates market falls, and some commentators have criticized this year's major slump.
