Markets summary and the Yuan’s depreciation in value | Calamatta Cuschieri

A falling Chinese yuan’s impact on the stock market and the China-US trade war

The Maltese market closed in the green on Monday, with the MSE Equity Total Return Index reflecting a positive change of 0.348% to 9,846.74 points. Tigne Mall plc had a strong showing, posting a gain of 3.41%. Conversely, Mapfre Middlesea plc witnessed some selling pressure resulting in a drop of 8.18%.  As for bonds, 5.75% Central Business Centres plc Unsecured € 2021 S1T1 contributed the highest positive change, as opposed to 4.4% Von der Heyden Group Finance plc Unsecured € 2024. MGSs contributed to 61% of total turnover with 2.4% MGS 2041 contributing the highest change at 1.47%.

US stocks saw sharp declines as President Donald Trump shook markets with his announcements on additional tariffs on Chinese goods. The Dow Jones Industrial Average lost 767.27 points, or 2.9%, to 25,717.74, while the S&P 500 retreated 87.31 points, or 3%, to close at 2,844.74. The Nasdaq Composite dropped 278.03 points or 3.5% to finish the session at 7,726.04.

Britain’s stock market indexes experienced a sharp fall in conjunction with U.S-China trade tensions. The FTSE 100 shed 2.5% in its worst day since early December, while the mid-cap FTSE 250 sank 2% and hit its lowest level in two months. The pan-European STOXX 600 index also dropped 2.3%.

A falling Chinese yuan’s impact on the stock market and the China-US trade war

The Yuan has fallen in value when compared to the U.S Dollar, for the first time in more than a decade. This event was described by market watchers as a ‘’line in the sand’’, resulting in fears of a heightened China-US trade war. Consequently, US stocks suffered their biggest one-day decline of 2019.

The decline was perceived by investors as a response to President Trump’s shock decision to impose tariffs on high worth imports from China. To investors’ dismay, Chinese officials did not deny any of the interpretations.

Although this move was interpreted to send a message, currency-watchers are still indecisive whether China’s intensions where to use this as a weapon in the trade battle. Should depreciation persist, this would put heavy pressure on other Asian currencies which will counteract any prospective trade benefits to Chinese exporters, importers, consumers and businesses borrowing in USD.

 

This article was issued by Peter Petrov, junior trader at Calamatta Cuschieri. For more information visit, https://cc.com.mt/. The information, view and opinions provided in this article are being provided solely for educational and informational purposes and should not be construed as investment advice, advice concerning particular investments or investment decisions, or tax or legal advice. Calamatta Cuschieri Investment Services Ltd has not verified and consequently neither warrants the accuracy nor the veracity of any information, views or opinions appearing on this website.

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