Sunday, July 15, 2018

Who's Winning The Trade War In One Chart

S&P 500 ETF SPY versus the Hang Seng HSI
Source
Trade war news started escalating in June. You want to know who's winning the trade war? Click the chart on the left. You'll see the US' S&P 500 ETF SPY (NYSEARCA:SPY) versus Hong Kong's Hang Seng Index (INDEXHANGSENG:HSI).

Many companies based in China trade on The Hang Seng Index.

Since June you can see the huge divergence between U.S. shares and Hong Kong listed shares.

Investors are worried about the outcome for their China-related investments much more than they are their U.S.-related investments.

China Showing A Weak Hand Already

In reaction to some trade concerns China has been letting their debt grow again which is something they were trying to control. Not wanting their economy to slow much they are allowing debt to build.

China has also been letting its currency slip of late. That's a sign of concern. Past drops of their currency have led to capital outflow from residents further pressuring their currency.

Lower currency may make exports cheaper but too big of a drop can cause regional currency destabilization and contagion risk.

These are some of the many reasons that the high-level charts on the two indices, U.S. and China have diverged. Investors are showing who they think has the strong hand and who has the weak hand.

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