Chinese investors are taking out their concerns over an ongoing trade dispute between Washington and Beijing and a slowing economy by dumping shares of mainland China companies.

According to technical measurements, the benchmark Shanghai Composite closed officially in bear market territory – declining at least 20 percent from recent highs. Earlier in the year, the smaller Shenzhen Composite moved into bear market territory in February this year.

One key factor weighing on the market is the heightened trade tensions between the U.S. and China, the world’s two largest economies. While U.S. investors have shown relatively limited response to the macro-impact of the tariffs, the main worry that seems to be gaining traction in the global market place is more on the non-tariff parts, which is on investment restriction. This could lead to a disruption in the global production line and also global trade.

Apart from trade war concerns, the slowing domestic economy has also led to some concern among investors, with questions lingering about the economic outlook for the country. Additionally, last week, the Chinese currency extended its losses against the dollar. Last week, the People’s Bank of China set the official Yuan midpoint at its lowest level in six months.

With this week starting a new quarter, we should find out early if the bear market in China will be a major drag on the global stock markets. We expect to see volatility in the equity markets persist in the short-term with trade war news seemingly flowing every day. Therefore, it we have to conclude that it will be the long-term view of the trade war that actually drives the trend this quarter.

If investors continue to successfully price in risk exposure then eventually the market should become immune to trade war headlines. However, if investors have to continue to deal with fresh headline issues then investors may be forced to make one big risk adjustments, which means we could see a steep sell-off.

The first week of the new quarter could actually prove to be a turning point for the entire year. Looking at the performances in the NASDAQ Composite, the Dow and the S&P 500, which settled the first half of the year up 8.88%, down 1.80% and up 1.70% respectively, it looks as if the risk has been spread across the board. This divergence is making investors nervous.

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