Hong Kong's Hang Seng plunges nearly 10%, mainland's China CSI 300 slumps about 5% on trade war worries

Hong Kong's Hang Seng Plunges Nearly 10%, Mainland's China CSI 300 Slumps About 5% on Trade War Worries

April 6, 2025

Hong Kong — Asian markets took a dramatic tumble on Monday as escalating trade tensions between China and the United States rattled investors and ignited a sharp sell-off in major indexes. The Hang Seng Index in Hong Kong nosedived nearly 10% during intraday trading before closing down 9.7%, marking its worst single-day performance since the global financial crisis in 2008. Meanwhile, China’s CSI 300 Index, which tracks the largest companies listed in Shanghai and Shenzhen, dropped 5.2% amid fears of deepening economic fallout.

The abrupt selloff follows a weekend of intensified rhetoric and fresh tariff threats between Washington and Beijing. U.S. officials accused China of violating recent trade commitments, while Beijing signaled it would respond with "firm countermeasures" should new tariffs be imposed. With both sides doubling down, investors are bracing for a renewed round of economic hostilities that could derail fragile post-pandemic recoveries in both countries.

Investors Flee Risk

The sharp declines reflect growing anxiety over the outlook for Chinese exports, corporate earnings, and capital flows, especially as global supply chains remain vulnerable. Hong Kong, already reeling from years of political unrest and a weakened real estate market, appeared particularly exposed. The financial hub’s benchmark index shed more than 1,700 points, with heavy losses in property developers, tech giants, and banking shares.

Shares of Alibaba Group fell over 12%, Tencent slid nearly 10%, and HSBC lost 8.4%, underscoring the breadth of investor panic. Meanwhile, mainland China's markets, though slightly more insulated due to capital controls, still registered significant declines, particularly in sectors tied to global trade and manufacturing.

"The market is pricing in a much more hostile trade environment," said Helen Wong, a senior strategist at Huarong International. "With trust breaking down and tariffs back on the table, there’s a genuine concern this could spiral into a broader economic confrontation."

Policy Response in Focus

Investors now await possible intervention from Chinese regulators or central bank authorities. The People's Bank of China (PBOC) has yet to make a public statement following the market rout, but analysts expect potential liquidity injections or even easing measures if the volatility persists.

In Hong Kong, financial authorities have urged calm. “The fundamentals of Hong Kong’s financial system remain sound,” said a spokesperson for the Hong Kong Monetary Authority. “We are closely monitoring developments and stand ready to ensure stability if needed.”

However, many investors believe the damage is already being done, particularly to market confidence. Foreign investment in Chinese equities had only just begun to rebound after years of COVID-19 disruptions and regulatory crackdowns, and this latest shock could reverse those gains.

Global Repercussions

The plunge in Asian markets sent ripples across global exchanges, with European markets opening sharply lower and U.S. stock futures pointing to a weak start. The U.S. dollar rallied as investors sought safety, while commodity prices, particularly oil and copper, dipped on fears of slowing demand from China, the world’s largest consumer of raw materials.

Analysts warn that the trade conflict, if not resolved soon, could hamper global growth at a precarious moment. “Both the U.S. and China face domestic pressures that make compromise difficult,” said Jason Lin, an economist at Nomura. “Unfortunately, markets are caught in the middle of a geopolitical chess match.”

As tensions continue to escalate, traders will be watching closely for any signs of diplomatic thawing or further escalation. Until then, volatility is likely to remain the dominant theme across Asia’s financial landscape.