Shanghai shares tumble 3.8% on rising trade tension between China and US

China's response is to firmly safeguard the interests of the nation and free trade system, says a statement on the commerce ministry's  official website.

Shanghai shares tumbled today as investors became worried due to rising trade tensions between China and US.

The Shanghai Composite Index fell below the 3,000-point threshold by losing 3.78 percent to end at 2,907.82. Most  sectors declined, with shares of telecommunication, iron and steel producers among the biggest decliners.

Telecom firms led the decline today, with Eastern Communications Co Ltd dropping 9.96 percent to 4.70 yuan (73 US cents) and China United Network Communications Ltd shedding 6.92 percent to 4.98 yuan.

Market sentiment dimmed after the US on Monday imposed a 10 percent tariff on US$200 billion worth of Chinese goods, marking an escalation in rising trade tensions between the two countries.

“China’s response is to firmly safeguard the interests of the nation and its people, free trade system and common interests of mankind,” said a statement published on the official website of the Ministry of Commerce today.

Nomura said in a note today that it expects a rising risk of a trade conflict, and “the next key date is June 30, when the US is scheduled to release investment restrictions and export controls for related Chinese persons and entities.”

“As the US-China trade conflict enters a tit-for-tat stage, we expect Beijing will adjust domestic policies given the new situation," Nomura said. 

"Recent activity data have surprised on the downside, implying end demand has been getting increasingly weaker due to rapidly shrinking credit supply from the shadow banking sector. We estimated that Beijing will make necessary adjustments and introduce easing measures.”

The People’s Bank of China today injected a net liquidity of 100 billion yuan into the financial market via reverse repurchase agreements, according to a statement published on its official website. The central bank also lent 200 billion yuan to financial institutions via its medium-term lending facility.

Investor appetite dampened Chinese tech giant Xiaomi announced a postponement its planned share offering via China Depositary Receipts in the mainland market until after it completed a separate listing in Hong Kong. 

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