Chinese ETFs have seen large outflows, triggering similar activity in wider Asia, Europe and the US on the back of trade war fears.
TrackInsight data shows that around $1.4 billion has been pulled from Chinese stocks over the past year, while $166 million has been redeemed over the past month.
Even though average performance of Chinese equity ETFs is in the green at around 14% over the past year, performance has dropped sharply to minus 6.5% over the past month.
The CSI 300, one of the largest equity indexes in mainland China, fell almost 3% on Monday, and has had four even harsher falls so far this year, according to Reuters. The index is down 15% this year.
Trump’s latest threat, after expressing a desire to rip up Nafta and impose tariffs on EU, Chinese and Canadian imports, was to pull out of the World Trade Organisation, which binds hundreds of countries.
The European Commission has also warned that Trump’s planned tariffs on car imports meant other countries across the world might respond in their own way, implementing tariffs on up to $300 billion worth of US products – the first such warning from Brussels.
Chinese currency, stocks and bonds all impacted
While the trade war rages, mostly with countries retaliating to Donald Trump’s rounds of tariffs and isolationist rhetoric, the US market has only felt a moderate impact this week, with the S&P 500 down 0.4% on Monday. The index is still up around 2.9% year to date.
As well as equity redemptions, China saw a further weakening of the renminbi against the US dollar and a broader currency basket. June was the currency’s worst month on record, according to the Financial Times. It is treading around Rmb6.6681 against the dollar.
There are also concerns that domestic demand in China is slowing. The country has seen a drop in infrastructure spending and a knock-on effect of less demand from Chinese manufacturing companies. As China’s trade surplus is forecast to decrease, it will drive the currency and stock market lower.