Hong Kong: Chinese stock markets faced a sharp downturn on Monday as revived trade tensions with the United States rattled investor confidence. The CSI300 Index and Shanghai Composite both fell nearly 2 percent, while Hong Kong’s Hang Seng Index dropped more than 2 percent, ending a period of optimism that had pushed equities to decade-high levels.
Despite the broad selloff, certain strategic sectors, including rare earths and semiconductors, recorded gains, reflecting their perceived importance amid the ongoing trade frictions. Analysts noted that while the market reaction is significant, it is unlikely to mirror the panic-selling seen in April during previous tariff escalations. Bond prices in China were expected to rise as investors sought safer assets.
The latest market slump followed announcements by U.S. President Donald Trump, imposing 100 percent additional tariffs on Chinese goods bound for the U.S. and implementing stricter export controls on critical software effective November 1. These measures came in response to China’s restrictions on exports of rare earth elements and advanced equipment. U.S. and European markets also reacted sharply, with Nasdaq-listed China stocks falling 6 percent and the KraneShares CSI China Internet ETF plunging 7 percent.
Shanghai-based hedge fund manager Wang Yapei observed that short-term pressure is expected, but predicted that negotiations would continue, as a large-scale trade conflict is costly for both nations. Investors are also anticipating policy support from Beijing, including potential monetary easing to stabilize growth. Some see the correction as a buying opportunity, especially for tech and strategic sectors, amid China’s push for self-sufficiency in key industries.
Brokerages highlighted that sectors like AI, robotics, defense, innovative drugs, and chipmaking could benefit from geopolitical tensions, while export-oriented industries such as machinery, electric motors, and furniture face severe risks if tariffs materialize. However, many analysts, including those from Changjiang Securities, believe the likelihood of full 100 percent tariffs is low, interpreting Trump’s announcements as a negotiation tactic rather than an irreversible policy.
Market watchers are closely monitoring the possibility of a Trump-Xi meeting, expected to influence the course of trade talks. Any easing of tensions could restore investor confidence, while continued uncertainty may prolong volatility. For now, Chinese equities remain under pressure, balancing geopolitical risks with opportunities in strategic, innovation-driven sectors.
This renewed episode underscores the fragility of markets amid geopolitical tensions and the careful balancing act investors must navigate between risk and opportunity in China’s fast-evolving economic landscape.