CHINA and Hong Kong equities closed the week lower, ending weeks of gains, as US President Donald Trump announced fresh tariffs on Chinese imports, while investors booked profit on tech stocks and turned focus to next week’s annual parliamentary meeting.
Hong Kong’s benchmark Hang Seng Index on Friday (Feb 28) slumped over 3 per cent, its largest one-day decline since October 2024. Chinese shares also fell, with the blue-chip CSI300 Index and the Shanghai Composite Index both losing around 2 per cent.
Geopolitical tensions escalated after Trump announced a 10 per cent duty on Chinese imports on Thursday, on top of the 10 per cent tariff that he levied on Feb 4, taking the cumulative tariff to 20 per cent.
“Trump’s Cabinet, especially the members in charge of foreign and trade policies, has exhibited a staunchly hawkish stance towards China,” said Ting Lu, chief China economist at Nomura.
Lu expected tensions between the two mega economies to worsen significantly, especially as China continues to make large strides in high tech, including in AI and robotics.
The Hang Seng Index declined 2.3 per cent for the week, after six weeks of gains, while the CSI 300 Index was down 2.2 per cent, as investors booked profit on the tech rally.
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“The market could use Xiaomi’s product launch event and Tencent’s new AI launch as catalysts for further profit taking in HSTECH names on Friday,” UBS analysts said.
Tech majors traded in Hong Kong slumped 5.3 per cent on the day, after surging nearly 30 per cent so far this year. AI shares traded onshore shed nearly 6 per cent.
Market focus is shifting from the recent AI euphoria back to economic fundamentals and macro policy, Morgan Stanley analysts said, ahead of the National People’s Congress (NPC) meeting scheduled for Mar 5.
Premier Li Qiang is expected to announce an unchanged 2025 growth target of roughly 5 per cent at the NPC session. Any policy changes that could shock the economy in the near term are not imminent.
Market participants broadly expect a budget deficit of 4 per cent of GDP in 2025, as reported in December. REUTERS
