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HONG KONG/SHANGHAI: China’s main stock indexes initially fell but rallied at the close on Tuesday as chipmakers wobbled after the latest US clampdown and financial firms were strained by the expectation falling interest rates will squeeze returns and margins.

The United States on Monday launched its third crackdown in three years on China’s semiconductor industry, curbing exports to 140 companies to stymie China’s ability to access and produce top-line chips.

“It was not a blanket ban, or as stringent as people first feared. So that, to me, is a positive,” said Tai Hui, Asia chief market strategist at J.P. Morgan Asset Management in Hong Kong. “That said, I think we’ve seen in the past few years, things get tighter and tighter.” Mainland indexes of global chipmakers and chip-making materials firms climbed nearly 3%.

But toolmaker Piotech, one of the companies newly targeted by the US, fell 4% and an index of domestic semiconductor firms fell 2%, albeit barely denting the 50% gains that sub-index has had in three months. The Shanghai Composite index closed up 0.44% at 3,378.81 points while the blue-chip CSI300 index was up 0.11%.

Chinese H-shares listed on the Hang Seng China Enterprises Index were up 0.9%, and the Hang Seng Index was up 1% at 19,746.32. In addition to having become more inured to US crackdowns after years of restrictions, investors in China’s semiconductor industry see targeted firms as likely to garner state support or, at least, earn revenue that would otherwise have flowed to global giants.

The broader market was weighed down by a gloomy economic outlook for China that has investors expecting further interest rate cuts, underlined by a weak reading for non-manufacturing spending.

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