Overnight the Shanghai stock market, as measured by the Shanghai Composite Index, fell 4.4%. (Which took down other Asian markets. Hong Kong’s Hang Seng Index was down 2.33%.)
That’s a substantial drop, no?
First, a huge drop in China’s exports. Exports fell 20.7% in February year over year. Economists had expected a 4.8% drop to make up for a stronger than expected January (up 9.1%.) Imports slipped 5.2% year over year against an expected decline of 1.4% and a January dip of 1.5%. That reduced China’s February trade surplus to just $4.12 billion from $39.16 billion in January and a projected $26.38 billion. As you might imagine this has stoked fears that the Chinese economy is slowing more rapidly than the Beijing government has revealed.
Second, analysts at China biggest state-owned brokerage (and I stress “state-owned) issued a bearish call on shares of a state-owned insurer. Traders in Shanghai interpreted this as a reversal of the government’s policy of “cheer-leading” the recent rally. The rally was in bubble territory, the thinking went, and the government wanted the rally to slow down. $345 billion in losses later, the market had definitely slowed.
The trade figures won’t reverse by Monday but sentiment about the government’s attitude toward the rally could. Stay tuned.This doesn’t feel like a one-day sell off, but given how uncertain sentiment is right now, I can’t say I really know.