China: State funds prop up stocks after slump from Trump tariff hike

[BEIJING] Chinese state-backed funds were active in buying domestic equities on Friday after they had slumped in the wake of the Trump administration imposing the biggest hit yet to China's exports to the US.

State funds jumped in after the lunch break, when the Shanghai Composite Index dropped 0.4 per cent after being up as much as 2.6 per cent in the morning session, according to two people familiar with the matter.

That helps explain the sharp V in intraday trading, one of them said, asking not to be named discussing private information.

By 2.26pm, the Shanghai Composite was back up 3 per cent. By contrast, Japanese shares - which had also risen in the Asian morning session - closed down in the wake of the escalation in tensions between the world's two largest economies.

Beijing vowed to take necessary "counter-measures" against the increase in American tariffs to 25 per cent from 10 per cent on more than US$200 billion of Chinese goods, though officials have yet to detail the steps.

Investors may also be looking for any broader policy response to cushion the country's economy, all the more so after data on Thursday showed a slowdown in credit growth for April.

State-backed funds were already reported to be active earlier this week, when Chinese stocks cratered in the aftermath of US President Donald Trump's Sunday tweet threatening to raise tariffs. The measures weren't enough to forestall a 5.6 per cent slide in the Shanghai Composite on Monday, the biggest tumble since February 2016.

The China Securities Regulatory Commission didn't immediately respond to a faxed request for comment on any measures to prop up stocks on Friday.

BLOOMBERG