U.S. President Donald Trump, left, speaks as Xi Jinping, China’s president, looks on during a news conference. (Photographer: Qilai Shen/Bloomberg)

Will The Fresh U.S.-China Trade War Concerns Take A Toll On Indian Equities?

Asian markets started off on a weak note on Monday after U.S. President Donald Trump threatened to impose higher tariffs on Chinese goods.

Trump on Sunday threatened to raise tariffs on $200 billion worth of Chinese imports to 25 percent from 10 percent. The U.S. President also floated the idea of extending an additional 25 percent duty to another $325 billion worth of imports.

While the Shanghai Composite Index plunged more than 6 percent—the most since Oct. 11, 2018—to 2,918.65, the Hang Seng in Hong Kong crashed nearly 4 percent in early trade. Tracking weakness in their Asian peers, both the Sensex and the Nifty 50 slipped over 1 percent.

Raising questions about the timing of these threats as the next round of trade talks commence in Washington on Wednesday, Seth R Freeman, senior managing director at Glassratner Advisory & Capital Group LLC, said the trade war concerns are likely to put pressure on commodity prices with a negative impact on base metals. “However, for India the sentiment remains positive overall and these events should not have a long-term impact.”

The outcome of the upcoming general election and the liquidity situation of non-bank lenders will act as key drivers for the Indian market going forward despite the negative global cues, according to Ashwini Agarwal, founder and partner at Ashmore Investment Management India LLP. Agarwal expects the two largest economies to reach an agreement even as it may take longer than anticipated.

Michael Preiss, executive director at Taurus Wealth Advisors, however, expects a steep fall in global markets. “Markets hit a record high last month on hopes of trade talks coming to a resolution,” Preiss said, adding that the markets would need to adjust to the reality. “The fall may even be steep given the sharp rise in the markets from December last year.”