HONG KONG: China and Hong Kong stocks stumbled on Tuesday, with a sell-off in tech heavyweights and escalating geopolitical risks pulling down the markets.
The Hang Seng Tech Index closed down 1.6% in volatile trade after sliding as much as 4.3% in opening hours, with Alibaba slipping 3.8% and Baidu dropping 3.9%.
The benchmark Hang Seng Index dropped 1.3% to pull back further from a three-year high. The onshore blue-chip CSI 300 Index declined 1.1%, and the Shanghai Composite Index declined 0.8%.
News that the Trump administration plans to tighten semiconductor curbs on China dampened sentiment, exacerbating geopolitical concerns following the “America First Investment Policy” which aims to step up restrictions on China.
The decline in Asia trading also follows the overnight drop in US-listed Chinese stocks on Monday.
The Nasdaq Golden Dragon China Index tumbled 5.2% in its worst single-day decline since October as profit-taking pressures ratcheted up. “The market has been so obsessed with China’s AI story like they’ve forgotten about Trump, but he’s always a wild card,” said Qi Wang, chief investment officer at UOB Kay Hian in Hong Kong.
The recent moves remind the market that Trump risk is still very real, he added. “The rally has overshot; the market has run ahead of itself.” The retreat this week marks a consolidation for China tech stocks’ best winning streak since 2020, as strong earnings and optimism about artificial intelligence triggered a re-rating for the sector.
Hedge funds’ willingness to boost bets on Asian stocks last week rose to its highest on record since 2016, according to Goldman Sachs, with China and Hong Kong attracting nearly half of Asia’s inflows. The conviction is still low over concerns about China’s policy consistency and geopolitical tensions, according to Bank of America.
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