Trade war anxiety is spreading in the stock markets especially in the US, China and Hong Kong.
While China’s government has unleashed $108 billion in reserve cut for most banks, the stock markets in China and Hong Kong are still shrinking surprisingly. And Hang Seng Index and Dow both have nearly 10% decline from previous highs. Some greedy individual investors just cannot wait to buy stocks in this bearish sentiment. However, for the major investors, they are looking for not less than 20-30% gains from the stock markets.
Assume Dow will increase to 26,000 points and HSI will get back to 32,000 points in the future, the stock prices will still have 10% or more corrections and there is still a period of time to be patient.
When the trade war tensions escalated, investors should stay away from Chinese stock markets, especially Hang Seng Index.
Last Tuesday, HSI tanked nearly 700 points and plunged around 2% after US president Donald Trump threatened new tariffs on Chinese imports. And today, HSI drops 1% even though China’s government released 700 billion yuan in cash to markets. We will see that the major investors are not going to buy more stocks from HSI and actually they might already locked in profits before the large fall. While Xiaomi opens its retail book today, I may suggest individual investors think twice before subscribing during a bearish market sentiment.
The stock market is a device for transferring money from the impatient to patient. Be patient!
Will trade war really start? It is difficult to say “Yes” at this moment as you know that it is not the first time for the US president Donald Trump to say trade war with China.
After the ZTE issue, China’s government does not want trade war with the US and realizes that they have not yet fully prepared for the trade war. The technology industries are still relying too much on the chips from the US. And it reveals that the fastest-growing GDP of China depends on the US technology suppliers. China technology industries still remain copying instead of creating. It seems that the US find the way to negotiate with China for the big trade deficit in the past. On the other hand, the US does not want a real trade war with China as well and just treat it as a negotiation. Please note that Donald Trump is a well-known business man and know how to scare the investment markets. While the stock and commodity markets are shaking, it could be the time for buying low.
The global investors are waiting for the real trade war! The US president Donald Trump is going to impose tariffs which could trigger trade wars with Canada, EU and China. Meanwhile, the global assets are too expensive to buy more. The Dow Jones industrial average hits 25,000, Hang Seng Index hits 30,000 and Hong Kong real estate prices are at an all-time high. Everybody wants to sell high, lock in profits and then buy low again. So maybe a real trade war is not a bad news!