Key indexes decline as US threat to impose tariffs rattles global investors
China's A-share market, together with other Asian peers, tumbled on Friday, after the unexpected tariff threat from the United States overnight rattled investors globally.
The benchmark Shanghai Composite Index fell by 1.41 percent to close at 2867.84 points, while the smaller Shenzhen Component Index ended 1.42 percent lower at 9136.46 points.
More than 3,000 shares, or 85 percent of the shares listed on mainland bourses in total, registered losses on Friday, with brokerages, energy equipment manufacturers and the shipping sector leading the fall.
Low investor sentiment was witnessed in other Asian bourses on Friday, with Hong Kong's Hang Seng, Japan's Nikkei and South Korea's Kospi losing 2.35 percent, 2.11 percent and 0.95 percent, respectively.
This happened after the US Administration announced overnight plans to impose a 10-percent tariff from Sept 1 on the remaining $300 billion of Chinese imports that have not been subject to additional tariffs.
The move immediately sent US stocks plunging, with the Dow Jones Industrial Average closing the day down more than 280 points, or 1.05 percent, to 26,583.42 points and the S&P 500 retreating 0.9 percent to a one-month low at 2953.56 points.
The tariff threat spooked global investors partly as it came after negotiators from the world's two largest economies concluded their latest round of trade talks on Wednesday and agreed to go for another round of talks in September.
Shanghai's newly-debuted STAR Market registered strong gains despite slumps on other submarkets, with daily price increases ranging from 1.7 percent to the upper limit of 20 percent, which analysts attributed partly to investors' passion for the new board.
Hu Yunlong, investment director of Beijing-based Kaixing Asset Management Co Ltd, said the external shock is accelerating bottoming-out of the A-share market, potentially ending the recent market correction and leading into another round of uptrend.
"Most shares are fluctuating around relatively low price levels and pressuring investors to clip their holdings," Hu said, adding that this is actually a great opportunity to buy shares with sound fundamentals and reasonable valuation levels.
The Shanghai Composite Index had dropped by 12.8 percent by Friday from its recent high in April at 3288.45 points, breaking the upward trajectory seen in the first quarter.
Wang Yi, chief strategist from Shenzhen-based Great Wall Securities, said the new tariff threat did not change his view of the A-share market's outlook in August. "Complexity and uncertainty of trade talks remain, despite that the two parties resumed negotiations and released positive signals."
In August, rising expectations over marginally easier liquidity conditions and targeted policy stabilization efforts may support A shares "effectively", Wang said, adding that a structural uptrend of listings that report robust or improving semiannual financial performances is more likely than a broad rise in share prices.
Particularly, brokerages and companies engaging in sci-tech innovations－such as computers, 5G, defense and media sectors－may outperform other companies, according to Wang.
Also in focus in August is that global benchmark provider MSCI Inc is expected to increase the inclusion of large-cap A shares from 10 percent to 15 percent, taking effect from close of Aug 27.
The weighting increase is expected to usher in $3.6 billion worth of overseas funds tracking MSCI indexes during the trading on Aug 27, according to a report from Shenzhen-based China Merchants Securities.
The timing of the inflows of actively-managed funds, meanwhile, may depend on the US Federal Reserve's posture toward further easing, the report said.
Ou Zhen contributed to this story.