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As reported by Bloomberg, analysts at JP Morgan are slashing their forward-looking calls for Chinese equities, fearing an over-hang from an all-out trade war between the US and China.

Key highlights

As the odds of a ‘full-blown trade war’ between the US and China continue to rise, JP Morgan Chase and Co have dropped their bullish stance on China stocks as the investment bank prepares for an all-out trade war.

With the US slated to max out on trade tariffs against China, the Greenback continues to gain ground over the Chinese Yuan, worsening the immediate market effects of the tariff spat between the two nations, and JPMorgan’s new base scenario for 2019 is a full-blown trade fracas as neither side shows any signs of mitigating the confrontation.

Despite this, JPMorgan is still betting on odds of a relief rally in emerging markets, but without accounting for economic countermeasures by the Chinese government, the trade war currently represents a 1% point ding to domestic growth in China.

“Higher tariffs are squeezing Chinese manufacturing’s profit margin, reducing the investment incentive and hiring, which would then drag on consumption via reduced income,” they wrote. – Bloomberg