Hang Seng Index Slips as Trade Tensions Keep Investors on Edge
Chinese requests opened the week on a shaky footing, with equities falling sprucely despite signals from President Donald Trump that the US is open to continuing trade talks. Investors remain conservative, and the Hang Seng Index reflected that apprehension.
The Hang Seng China Enterprises Index fell 3.1% on Monday, driven down by tech titans Alibaba and Tencent.
Landmass shares also declined, with the CSI 300 Index dropping as much as 2.7%.
In response, the People’s Bank of China( PBOC) nudged its diurnal reference rate to the loftiest position since November, aiming to stabilise the yuan.
After a strong rally earlier this year, Chinese stocks had seemed resilient to trade tensions, with optimism around tech growth and Beijing’s economic support measures driving gains.
Goedemorgen vanuit Azië! In de Chinese handel verliest de Hang Seng index momenteel 3,5% waarbij de verkoopgolf van vrijdag zich verder zet. Aziatische Beleggers gaan er nog steeds vanuit dat de handelsspanningen tussen de VS en China niet meteen voorbij zijn.
In Europa en in de… pic.twitter.com/w9a6c62TM0
— Stefan Willems (Beurs/Expat) (@FinanceFilosoof) October 13, 2025
But Trump’s weekend threat of a 100% tariff on Chinese goods, retaliating for Beijing’s controls on critical minerals, reminded investors just how fragile any truce could be.
The sell-off was less severe than last Friday’s 6.1% tumble in the Nasdaq Golden Dragon China Index, and some traders are already eyeing the dip as a potential buying opportunity, hopeful that talks with Washington could prevent further escalation.
“Markets should brace for near-term volatility from the tariff headlines, but China’s diversified export base and swift policy response mean the broader impact on the economy and markets is contained,” said Dilin Wu, strategist at Pepperstone Group.
“Traders may see this as a short-term shock rather than a structural threat.”
A prolonged deterioration of US-China relations could put this year’s stellar performance of Chinese equities at risk, raising questions over the country’s appeal to international investors.
The Hang Seng China gauge had surged almost 30% in 2025, fuelled by trade optimism and the growing role of Chinese firms in artificial intelligence. Alibaba’s shares, for instance, have more than doubled this year.
Some sectors proved resilient on Monday. Chinese chipmakers saw earnings as investors go on, Beijing boosting subsidies to reduce reliance on US technology and supporting domestic enterprises.
Semiconductor Manufacturing International Corp. climbed 6.1. Rare-earth stocks also advanced, reflecting China’s strategic use of critical minerals as trade influence.
In currency markets, the offshore yuan regained lost ground, rising 0.2%. The PBOC set the yuan fixing at 7.1007 per dollar, above market expectations. China’s bond futures also benefited from risk-off sentiment, with 30-year contracts jumping 0.7%.
“This fixing is a strong signal that despite President Trump’s threat of 100% tariffs against China, the PBOC will not allow the yuan to depreciate and intends to maintain exchange rate stability,” said Khoon Goh, head of Asia research at ANZ Singapore.
“This should help to calm the broader Asian FX markets today.”
Despite the jitters, fundamentals remain solid. Chinese exports beat expectations in September, rising 8.3% year-on-year, compared with economists’ forecast of 6.6%. Analysts say any short-term weakness could attract investors who missed out on earlier gains.
The current standoff centres on export controls. The US restricts shipments of semiconductors and AI chips to China, while Beijing limits exports of critical accoutrements and attractions to the US.
Meanwhile, investors are also keeping an eye on the forthcoming Chinese Communist Party meeting from October 20 – 23, which will shape profitable development plans for the coming five years.
Retail sentiment has shown signs of cooling, with early Golden Week data indicating weaker consumer spending, even as equities continue their bull run.
Francis Tan, Asia chief strategist at Indosuez Wealth in Singapore, said: “The latest tit-for-tat between the US and China will cause quick downward pressure on Chinese stocks, but the short-term decline is a good opportunity to increase allocation if one doesn’t have enough of China in the portfolio.”
The Hang Seng index and wider Chinese markets are now navigating a delicate balance, buoyed by strong fundamentals, yet vulnerable to geopolitical shocks.
