How Will China Affect Your Investments? Contact Your Adviser!

The Shanghai Composite is treading dangerously close to bear market territory, echoing concerns regarding the Chinese economy.

The index is down by 19% from the highs experienced in January, with 20% the level of decline necessary in order to officially classify it as a bear market. The Shanghai index closed down 5% last week, with the Hang Seng Index in Hong Kong also being down 3.4% in the same time period.

The trade tensions with the US are the main reason for the lacklustre performance, with some domestic factors such as monetary tightening also playing a part.

The retaliation of China to the US's sanctions caused the US to announce that it would impose new tariffs of $200 billion in response.

Share prices in the region have also suffered, with Vietnamese and Japanese indices down by 4.6% and 2.2% respectively.

A further correction of 20-30% could be a possibility according to a recent study by UBS Group based on existing priced in expectations.

UBS don't expect the worst case scenario to eventuate however:

"If our base case plays out, and calm is restored, current sentiment is likely pricing in too harsh an outcome."

According to a survey conducted by Bank of America Merrill Lynch, a trade war is the single most threatening factor with regard to portfolio performance.

68.6% of Japan focused investors were most concerned about international affairs according to a similar survey from Nomura.

China remains a strong centre of growth and  financial performance but investors need to remain vigilant according to Laith Khalaf of Hargreaves Lansdown:

"China is undeniably an exciting investment opportunity, but its stock market should be expected to be volatile, and will be subject to the yin and yang of global economic confidence."

Your financial adviser can help to make sure you are sufficiently diversified and in the right investments that will help you to achieve your long term goals.

The value of investments and income from them may go down as well as up and you may not get back the original amount invested.

Information is based on our current understanding of taxation legislation and regulations which is subject to change.

Past performance is not a reliable indicator of future performance.