My headline is not quite correct, BlackRock see the tensions as much more than a trade war.
Anyway, in brief:
- rising U.S.-China rivalry is casting a cloud over China's growth outlook
- Selling of Chinese equities by foreign investors hit record highs in April and May
- greatest outflow of foreign capital since the launch five years ago of the "stock connect" program
- For now, the Chinese economy appears to be holding steady, thanks to policy support
Jumping to the firm's "Bottom line":
- We see the direct impact from a fallout in U.S.-China trade talks as limited. And we expect Chinese policymakers to provide support in the case of a downturn, yet are mindful that many policy tools could have unintentional side effects on the economy and markets. Our research on the ground still pointed to confidence in the resilience of the Chinese economy, despite trade talks grinding to a halt. One reason: The credit impulse to the economy is turning positive - a sea change from last year's clampdown on credit growth. Yet the heightening global trade conflict - including a U.S. threat of tariffs on Mexican goods - is a source of major macro uncertainty globally. This reinforces our call for portfolio resilience, including allocations to U.S. government bonds, which have historically played an important role in cushioning portfolios against bouts of volatility.
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Not an alarmist take from BlackRock, but do take note of "many policy tools could have unintentional side effects on the economy and markets" and "the heightening global trade conflict - including a U.S. threat of tariffs on Mexican goods - is a source of major macro uncertainty globally".
On the first, unintentional side effect (usually unforeseen also) tend to come back and bit you in the derriere. Murphy's Law.
On the second - yes, well canvassed.
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BlackRock is the world's largest asset manager
