A decoupling between the world’s two largest capital markets could cost US$2.5 trillion in an extreme scenario, as investors from the US and China are forced to divest their holdings of equities and debt instruments, according to an analysis by Goldman Sachs.
US investors could be forced to sell nearly US$800 billion of Chinese stocks trading on American exchanges in case of a decoupling, the US investment bank’s analysts led by Kinger Lau and Timothy Moe said in a report on Monday.
On the flip side, China could liquidate its US Treasury and equity holdings amounting to US$1.3 trillion and US$370 billion, respectively.
The sell-off was based on the assumption that US investors would be restricted by US regulations from such investments, they said.
“In the capital markets, equity investors are very focused on the renewed risk of Chinese ADR [American depositary receipt] delisting,” Goldman analysts said in the report.
Trader Peter Michael Tuchman reacts as he works on the floor of the NYSE on Friday.
Should the threat become a reality, it will affect nearly 300 companies, including some of China’s biggest technology companies. »
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