US markets reflect trade uncertainty

US stock turbulence reflects investors' worries about a likely trade war initiated by the Trump administration which may involve the rest of the world, including China, the European Union, Mexico and Canada, an asset manager said.

Zheng Fang, managing director and chief investment officer of Keywise Capital, told China Daily website when Trump starts to impose additional tariffs on these countries, there will have consequences mirrored in the global stock market.

US stocks kicked off the week at a firm low on Monday, with major indexes experiencing their biggest one-day drop in weeks as uncertainty looms over world trade.

The Dow Jones Industrial Average slid 328.09 points to close at 24,252.80, violating its 200-day moving average, a closely watched technical metric, for the first time since June 2016. And the S&P 500 dropped 1.37 percent to 2,717.07, its worst day since April 6, while the Nasdaq composite also plummeted 2.09 percent to close at 7,532.01.

The benchmark Shanghai Composite Index was down 0.52 percent at 2,844.51 on Tuesday, its lowest closing since mid-June 2016. The Shenzhen Component Index closed 0.16 percent higher at 9,339.37. The ChiNext Index, which tracks China's NASDAQ-style enterprises, gained 1.71 percent to close at 1,564.92.

Since the Sino-US trade dispute broke out on March 22, A-share market investors have suffered great losses. As of June 22, more than 7 trillion yuan ($1.07 trillion) has been wiped off the Shanghai and Shenzhen stock markets, according to Securities Daily.

"In general, we believe the Chinese economy is in good shape and, for now, resilient against likely tariff measures. Corporate earnings growth is still expected to be strong this year at around 16 percent," Harvest Global Investments (HGI) said in an email interview with China Daily Website.

The international arm of Harvest Fund Management said China's deleveraging efforts and resultant policies have posed some challenges in the first half, but should the macro environment worsen, it will likely see more supportive policy responses — an expansionary fiscal and proactive monetary stance.

"From a longer-term perspective, despite some short-term pain, deleveraging will help create a healthier macro landscape. Other factors, like trade friction, may cause market turbulence but not changing the bigger picture."

With regard to different sectors specifically, HGI said healthcare and technology continue to see upgrades despite recent market corrections, allowing access at very reasonable valuations. And other sectors that have been more affected, including construction, real estate and commodities, are now looking reasonably attractive in valuation terms.

Market volatility may still linger as risks — such as major central bank policy changes, geopolitical uncertainties and power shifts — exist in the second half of the year, the firm said.