Hong Kong Stocks Face Extended Decline Amid Rising US-China Tensions
Hong Kong stocks experienced a sixth consecutive day of losses on Monday, marking the longest losing streak in nine months. This downturn has left investors increasingly cautious due to the recent escalation in US-China trade tensions.
The Hang Seng Index fell by 2.6 per cent to 25,594.80 as of 11:24 am local time, mirroring a similar six-day decline in January. Over the past five trading days, the benchmark index has dropped by 3.7 per cent. The Hang Seng Tech Index also saw a significant drop, falling 3.3 per cent during this period.
On the mainland, the CSI 300 Index slid by 1.7 per cent, while the Shanghai Composite Index retreated by 1.2 per cent. These declines reflect the broader uncertainty gripping the financial markets.
Major Companies Hit Hard by Trade Tensions
Companies with substantial exposure to the US have been particularly affected. Biotech giant WuXi AppTec, which derived two-thirds of its revenue from the US in the first half of the year, plummeted by 6.7 per cent to HK$104.80. Its affiliate, WuXi Biologics, also suffered, dropping 7.5 per cent to HK$35.06.
Alibaba Group Holding and Tencent Holdings were also hit hard, with Alibaba’s shares falling 4.3 per cent to HK$158.30 and Tencent’s shares slipping 3.2 per cent to HK$630.50.
A Rare Bright Spot in the Market
Despite the overall negative trend, chipmaker SMIC was an exception, rising 0.7 per cent to HK$78.10. This increase was driven by expectations that a potential revival in US-China relations could boost demand for locally produced chips.
The market’s reaction to US President Donald Trump’s threat on Friday to impose a 100 per cent tariff on all Chinese imports and restrict exports of critical software from November 1 has been significant. This move was a response to Beijing’s decision to tighten controls over rare earths and their processing technology—materials essential for everything from defense equipment to green-energy products and semiconductors.
However, Trump has indicated openness to engaging in discussions with China to resolve the dispute. He is scheduled to meet with Chinese President Xi Jinping at the Apec summit in South Korea later this month.
Analysts Highlight Ongoing Uncertainty
Stephen Innes, a managing partner at SPI Asset Management in Bangkok, noted that “this isn’t an official detente, it’s pre-negotiation theatre.” He added that each tariff threat leaves a mark on the supply chain, and prolonged uncertainty causes traders to factor in these risks.
The renewed tension between Beijing and Washington has caught investors off guard, leading to a sharp decline in global risk assets, including US equities and cryptocurrencies. The sudden shift in geopolitical dynamics has made equities more vulnerable, especially amid concerns about high valuations and a potential AI bubble.
Regional Markets Also Feel the Impact
In other parts of the Asia-Pacific region, markets showed similar signs of weakness. South Korea’s Kospi retreated 1 per cent, Australia’s S&P/ASX 200 lost 0.6 per cent, and Taiwan’s Taiex fell 1.6 per cent. Meanwhile, Japan’s market remained closed for a holiday.
Broader Implications for Global Markets
The ongoing volatility underscores the interconnectedness of global financial markets. As trade tensions continue to evolve, investors remain wary of how these developments might affect economic growth and corporate earnings.
The situation highlights the importance of monitoring geopolitical developments closely, as they can have far-reaching implications for both regional and global markets. With key meetings and negotiations on the horizon, the coming weeks will be crucial in determining the trajectory of these markets.