What does Biden’s exit from the White House race mean for China’s stock traders?
- Chinese stocks have witnessed increased gyrations, with the 10-day realised volatility of the CSI 300 Index and the Hang Seng Index both surging to a three-month high
US President Joe Biden’s decision to quit the White House election race has muddied the waters for stock traders looking to reposition their portfolios, as they now have to wade through a more complicated geopolitical landscape and market volatility.
Chinese stocks are no exception, as the 10-day realised volatility of the CSI 300 Index and the Hang Seng Index both surged to the highest in three months this week, according to Bloomberg data.
“Obviously, this is expected to add to volatility in the short-term as the uncertainty about the new Democratic ticket might not be resolved until the party’s convention in August,” said Kristina Hooper, a strategist at Invesco. “There has been a big pickup in volatility in recent days, but I expect that will only increase now.”
The wild gyrations in global markets add to a slew of headwinds already rattling Chinese stocks, including the absence of strong stimulus measures from the Communist Party’s third plenum last week and slower-than-estimated second-quarter economic growth.
Former president Donald Trump, who started a trade war against China in 2018, said he would impose a universal 60 per cent tariff rate on all Chinese imports if re-elected, while a Harris win probably means a continuity in the policies of the Biden administration, which has also ratcheted up curbs on hi-tech exports.
Trump’s return to the White House would be devastating for the global and Chinese economies, as a 60 per cent tariff means a falling-off-the-cliff slowdown in exports, which has been underpinning growth in the Asian nation this year, according to Stephen Innes, a managing director at SPI Asset Management in Bangkok, who dubbed it trade war 2.0.
