HONG KONG: China’s chip-making stocks shrugged off the latest US clampdown to notch small gains on Tuesday, but financials dragged on the broader market as falling interest rates are expected to squeeze insurers’ returns and lenders’ 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 around 2%, while designers and even toolmaker Piotech, one of the companies newly targeted by the US, rose around 1%. The broader Shanghai Composite, blue chip CSI300 and Hong Kong’s Hang Seng all fell around 0.5%.

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.

China, HK stocks climb on upbeat manufacturing data

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.

Benchmark 10-year bond yields fell to their lowest on record on Monday as widespread lack of confidence in the property sector and a drifting stock market drives money into debt markets.

Financial stocks dropped 0.4% in morning trade.

The yuan touched a one-year low of 7.2890 per dollar while ten-year Treasury futures hovered near record highs.