SHANGHAI: Hong Kong stocks experienced their biggest drop since 1997 on Monday after Beijing fired back at US tariffs with its own trade levies, deepening market turmoil amid fears of a widening trade war, while China’s sovereign wealth fund intervened to stabilise local shares.

Hong Kong’s Hang Seng index slumped 13.2%, the biggest one-day decline since 1997, with shares of tech, solar, banking and online retailers plunging as investors swiftly pulled out of anything linked to global growth and trade.

China’s CSI300 blue-chip index ended lower by 7% as Central Huijin, or the so-called “national team” of state-backed investors, said in the afternoon session that it has increased holdings of Chinese stocks to defend market stability. Trading volume for some ETFs linked to the CSI300 index soared.

The yuan slipped to its lowest since January and bonds rallied sharply.

China, which is now facing US tariffs of over 50%, responded in kind on Friday by slapping extra levies on US imports.

The intensifying spat between the world’s two biggest economies threatens to upend trade flows, and besides hitting Chinese earnings, it is also expected to drive a slowdown in global demand at a time of stuttering growth in China.

“I think the impact of this shock is going to be quite significant,” said UBS chief China economist Tao Wang on a call with investors on Monday. “It was challenging to achieve the government’s growth to start with. And now it’s even more challenging.”