May 30, 2019 / 7:23 AM / 4 months ago

China stocks fall as fears of prolonged trade war escalate

* SSEC falls 0.3%, CSI300 0.6% lower

* China says provoking trade disputes is ‘naked economic terrorism’

SHANGHAI, May 30 (Reuters) - China stocks dropped on Thursday, as trade war fears heightened after Beijing stepped up the rhetoric against Washington.

** The blue-chip CSI300 index fell 0.6%, to 3,641.18, while the Shanghai Composite Index lost 0.3% to 2,905.81.

** Provoking trade disputes is “naked economic terrorism”, a senior Chinese diplomat said on Thursday, ramping up the rhetoric against the United States amid a bitter trade war that is not showing any signs of ending soon.

** “This kind of deliberately provoking trade disputes is naked economic terrorism, economic homicide, economic bullying,” China’s Vice Foreign Minster Zhang Hanhui said.

** His comments came after Chinese newspapers reported that Beijing could use rare earths to strike back at Washington after U.S. President Donald Trump remarked he was “not yet ready” to make a deal with China over trade.

** The possibility of A-share market returning to the bottom-seeking process in 2018 could not be ruled out, given no short-term solution to the stalemate in the Sino-U.S. trade war and a lack of upside momentum for China’s macro economy, Zheshang Securities noted in report.

** The A-share market could come under further pressure in case of substantially increased volatility in overseas markets, the brokerage added.

** Activity in China’s vast factory sector is expected to have shrunk in May after expanding slightly for two months, keeping pressure on policymakers to roll out more stimulus to stabilise an economy hit by a bruising trade war with the United States.

** China on Wednesday adopted a series of guidance measures, from improving macro-economic policies and ensuring food security to lowering medical costs, as President Xi Jinping warned that reform faces new problems with external uncertainties rising.

** Around the region, MSCI’s Asia ex-Japan stock index was firmer by 0.21%, while Japan’s Nikkei index closed down 0.29%.

** At 0704 GMT, the yuan was quoted at 6.9061 per U.S. dollar, 0.1% firmer than the previous close of 6.913.

** So far this year, the Shanghai stock index is up 16.5% and the CSI300 has risen 20.9%, while China’s H-share index listed in Hong Kong is up 3.4%. Shanghai stocks have declined 5.6% this month.

** As of 0705 GMT, China’s A-shares were trading at a premium of 26.16% over the Hong Kong-listed H-shares. (Reporting by Shanghai Newsroom; Editing by Rashmi Aich)

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