China's yuan, stocks plunge as Trump returns to White House
China's financial markets took a nosedive on Wednesday, with the yuan and stock markets taking a hit. The instability is largely due Donald Trump regaining the US presidency and Republicans taking control of Congress. The political changes could further intensify trade and technology disputes between the two countries. By the close of Chinese markets, Trump had declared victory over Democratic candidate Kamala Harris in the US presidential race, scoring 277 electoral votes.
Tech stocks tumble due to Trump's victory
China's blue-chip index, CSI 300 Index, fell by 0.5% while Hang Seng Index declined by 2.2%. The Hang Seng China Enterprises Index also fell 2.56%. Major Hong Kong-listed tech companies such as JD.com and Alibaba saw their stock value plummet 4% each. These declines mirror the wider impact of the US presidential election on China's economy and capital markets. However, unlike China's financial slump, US stock futures soared and the dollar gained on all fronts.
Trump's tariff threats impact market sentiment
Trump's campaign promise to impose tariffs of 60% or more on Chinese goods has greatly swayed market sentiment. Eastspring Investments portfolio manager Rong Ren Goh told Reuters that the markets are now focused on the prospect of tariffs as it is the most direct measure a president can take. He also hinted at other measures to contain China, including financial sanctions and restrictions on access to crucial technology for AI development.
China's equity market recovery at risk
China's equity market is currently recovering from a prolonged slump, with the CSI 300 index rising over 20% since September 23. This increase followed Beijing's implementation of rate cuts and stimulus measures. However, Trump's victory could hinder this recovery, particularly impacting technology, defense, and export sectors. Kenny Ng from China Everbright Securities International in Hong Kong noted that while both US political parties have a tough stance toward China, Trump's unpredictability could further dampen market sentiment.
