China has lost its ranking as the world’s No. 2 stock market.
After a slump on Thursday, Chinese equities were worth US$6.09 trillion, compared with US$6.17 trillion in Japan, data compiled by Bloomberg showed.
The US has the world’s largest stock market at just more than US$31 trillion.
China’s stock market overtook Japan’s in late 2014, then soared to an all-time high of more than US$10 trillion in June 2015.
Chinese equities and the yuan have taken a beating this year amid a trade spat with the US, a government-led campaign to cut debt and a slowing economy.
“Losing the ranking to Japan is the damage caused by the trade war,” CEB International Investment Corp head of research Banny Lam (林樵基) said in Hong Kong. “The Japan equity gauge is relatively more stable around the current level, but China’s market cap has slumped from its peak this year.”
The Shanghai Composite Index has this year lost 17 percent to be among the world’s worst performers.
Industrial and tech stocks have been among China’s worst performers, with those subindices on the CSI 300 Index of large caps sliding more than 20 percent this year.
China’s Politburo, a body comprised of the Chinese Communist Party’s 25 most senior leaders, on Tuesday signaled that policymakers would focus more on supporting economic growth amid risks from the deleveraging campaign and the trade standoff.
Still, the Shanghai Composite Index suffered its worst week since early February.
“The market will likely continue to hover at low levels for the next couple of months,” First Shanghai Securities Ltd (第一上海證券) Hong Kong-based strategist Linus Yip (葉尚志) said. “But there’s still a chance that China’s stock market will recover with total capitalization ascending to the world’s No. 2 place again. After all, the economic fundamentals are still stable and growth momentum will resume after a short-term downturn.”
Losing the No. 2 ranking is a reminder that China’s role in global financial markets — while large — still does not match its economic might.
Policymakers have pledged to open areas such as investment limits on industries from banking to agriculture, but foreign ownership of equities and bonds remains low.
The yuan’s share of global payments in June fell to 1.81 percent, from 1.88 percent a month earlier, Society for Worldwide Interbank Financial Telecommunication data showed.
While Japan’s benchmark TOPIX has declined more than 4 percent this year, it remains one of the better-performing markets in Asia amid support from the Bank of Japan’s exchange-traded fund purchases and as most firms continue to report robust earnings growth.
Almost 60 percent of firms on the gauge that have reported in the current earnings season have beat analysts’ expectations.
The yuan has weakened more than 8 percent against the US dollar in the past six months, and there are few signs the People’s Bank of China has been intervening in the currency market.
China’s currency is in line for an eighth weekly retreat, the longest run since the start of the country’s modern foreign exchange rate regime in 1994.
The yuan’s tumble has prompted forecasters to lower their estimates for the exchange rate.
Deutsche Bank was among the latest to do so, cutting its year-end prediction to 6.95 yuan per US dollar from 6.8 on Wednesday, saying that trade tensions would likely put persistent pressure on China’s current account in the next few years.
The market value calculations only include primary listings to avoid double counting. Hong Kong’s equities are valued at US$5.1 trillion.
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