After the dead cat bounce peaked in late May, it's been going from bad to worse for Chinese stocks. In addition to a never-ending housing crisis and a lack of any credible policy to bolster market confidence, the looming US election could also become a major threat to investors. In a note published on Monday, Goldman estimates that China’s stocks could fall sharply if Donald Trump returns to the White House and imposes steep tariffs on the nation’s exports (see "China Strategy: Trading "Trump Trade" in China ", available to pro subs).
As Bloomberg notes, the sharp selloff of US stocks Wednesday has made Chinese shares appear less miserable in comparison (let's not fool ourselves, Chinese stocks are unchanged for the past decade and anyone hoping for a bounce has been punked over and over). But if investors are turning more bearish on major economies, it cannot be good news for the Chinese market. After all, exports have been one of its economy’s few bright spots these days.
