Japan Dethrones China To Become World’s Second-Biggest Stock Market

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Japan’s market was valued at $6.16tn while Chinese equities were worth $6.09tn. The US remained the biggest stock market at $31tn. After a Thursday slump, China just lost its ranking as the world’s number two stock market to Japan. China’s stock market overtook Japan’s in late 2014, then soared to an all-time high of more than $10 trillion in June 2015.

Chinese equities and the nation’s currency have taken a beating this year amid a trade spat with the U.S., a government-led campaign to cut debt and a slowing economy. Banny Lam, head of research at CEB International Investment Corp. in Hong Kong said, “Losing the ranking to Japan is the damage caused by the trade war” and further added, The Japan equity gauge is relatively more stable around the current level but China’s market cap has slumped from its peak this year.”

Losing the number two spot is a reminder that China’s role in global financial markets, while large, still doesn’t match its economic might. The yuan’s share of global payments fell to 1.81% in June from 1.88% a month earlier. Policymakers have pledged to open areas such as investment limits on industries from banking to agriculture, but foreign ownership of equities and bonds remains low.

Japan’s benchmark Topix index has declined more than 4 percent this year, it remains one of the better-performing markets in Asia amid support from the Bank of Japan’s ETF purchases and as most companies continue to report robust earnings growth. Nearly, 60% of firms on the gauge that have already reported in the current earnings season have beat analyst expectations.

The fall also underscores how the ongoing trade spat with the US, Beijing’s campaign to temper debt-fuelled growth and signs of slowing domestic demand have combined to dampen investor sentiment for Chinese assets. All this is a far cry from the heydays of June 2015, when Chinese equities market hit a peak valuation of $10tn just before a stock market bloodbath began that ultimately wiped as much as $5tn in value from the market and briefly took it within sight of Japan’s level at the time.