‘All Bets Are Off’: Bloodbath In China, Hong Kong As Trade War Spirals

Chinese shares were butchered on Friday amid escalating trade tensions between Beijing and Washington.

Just hours after the Trump administration slapped some $50 billion in new tariffs on China in retaliation for IP theft, Beijing fired what amounted to a warning shot with $3 billion in tariffs of its own.

The SHCOMP was down 3.4%, its worst day since the February turmoil. The ChiNext was down an egregious 5%. It’s been a rough week:

Some folks think this is not the time to be buying the proverbial dip. “Investors shouldn’t be too hasty to catch falling knives,” Hao Hong, chief strategist with Bocom International, said on Friday, adding that “while the market’s pessimistic reflex may be tempting for some to bottom fish, we note that market visibility in the near term is extremely clouded.” Yes, “extremely clouded” – because there’s no telling what Trump will do and China hasn’t even fired any of its big guns yet.

“All bets are off” if the worst-case scenario materializes and “fundamentally changes [the] global growth outlook,” Hao added.

It might be time to call in the vaunted “national team.”

As for the yuan, it actually pared losses after its worst day since late February and there were some questions as to whether the PBoC might have been in the market overnight:

Ultimately, USD/CNH would end up retracing almost half of yesterday’s rally. But according to Zhang Ming, a researcher with the Chinese Academy of Social Sciences, China may indeed devalue to prop up exports as the economy “may face a significant downturn in the second half on weak domestic demand and investment,” MNI says, citing an interview with Zhang.

Meanwhile, Hong Kong was a shitshow too, with the Hang Seng adding to Thursday’s losses and plunging a further 2.5%. This is three down days in a row and actually, it could have been much worse on Friday.

Not helping matters there is Tencent, which has lost nearly $50 billion in market cap over two sessions after Naspers said it raised HK$76.9 billion unloading a 2% stake at a near 8% discount to Thursday’s close. Apparently, volume was more than 1,000% the three-month average, according to Bloomberg’s Mark Cranfield.

You get the idea. But hey, at least it’s Friday, right?

I’m sure Asian investors are really – really – looking forward to Trump’s traditional weekend Twitter tantrum which one certainly imagines will feature a whole lot of trade “covfefe”.

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