Published: Sun, August 05, 2018
Business | By Tara Barton

Japan dislodges China as world's second biggest stock market

Japan dislodges China as world's second biggest stock market

China has just ceded its four-year title as the world's second-largest stock market to Japan, as an intensifying trade spat with the United States and its campaign to reduce leverage weighed on equities.

The figures showed Chinese stocks were worth $6.09 trillion, compared with $6.17 trillion in Japan at the end of business on Thursday.

Investors cautious mood came amid an elevation in trade tensions between the world's top two economies intensified midweek after US President Donald Trump raised pressure on China by proposing a higher 25% tariff on $200 billion worth of Chinese imports from a previously announced 10%. Chinese equities and the nation's currency have taken a beating this year amid a trade spat with the US, a government-led campaign to cut debt and a slowing economy.

The China Academy of Building Research, the largest and most diverse research institution in China's building industry, saw its shares drop by the daily maximum of 10 percent to close at 26.90 yuan (US$3.95). Still, the Shanghai Composite Index suffered its worst week since early February. "After all, the economic fundamentals are still stable and growth momentum will resume after a short-term downturn".

Losing the number two spot is a reminder that China's role in global financial markets - while large - still does not match its economic might.

Chinese artist Ai Weiwei says authorities demolished Beijing studio
In January 2011, Ai Weiwei had his Shanghai studio unexpectedly razed by the Chinese government, in similar circumstances. In 2011 he was detained for 81 days after being accused of tax evasion , charges that he said were politically motivated.

Japan's benchmark Topix index has declined more than 4% in 2018, but it remains to be one of the best-performing markets in Asia amid robust earnings growth reported by companies and support from Bank of Japan's ETF purchases. Nearly 60 percent of firms on the gauge that have reported in the current earnings season have beat analyst expectations.

Offshore yuan, which is traded by worldwide investors outside mainland China, was at 6.8824 per USA dollar on Friday, extending a 0.8% decline on Thursday, after the Trump administration threatened to increased tariffs on Chinese goods to 25% from 10%. Yuan is facing the longest retreat since the start of China's modern foreign exchange rate regime in 1994.

The Shanghai Composite was little changed on Friday, trading lower by 0.05 percent at 1:25 p.m. HK/SIN.

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