SHANGHAI: China and Hong Kong stocks dropped on Thursday after US President Donald Trump’s fresh tariff plans, but losses were limited as analysts said the Chinese stocks rally – triggered by the DeepSeek breakthrough – still has legs to run.
Hong Kong stocks gain slightly, China flat on profit-booking
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China’s blue-chip CSI300 Index fell 0.4% by the lunch break, while the Shanghai Composite Index dipped 0.2%, as China left benchmark lending rates unchanged at the monthly fixing.
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In Hong Kong, the benchmark Hang Seng Index was down 1.4%, dragged by a sharp correction in technology stocks.
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Markets in Asia wobbled after Trump said on Wednesday he would announce tariffs related to lumber, cars, semiconductors and pharmaceuticals “over the next month or sooner.”
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Highlighting growing Sino-US frictions, China condemned tariffs launched or threatened by Trump at a World Trade Organization meeting. The US has announced sweeping 10% tariffs on all Chinese imports.
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The market weakness was also driven by profit-taking after sharp gains in Chinese tech shares triggered by the success of start-up DeepSeek, whose low-cost, breakthrough AI model shocked the world.
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But investments banks, including Morgan Stanley, see further upside in China stocks.
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The Wall Street Bank upgraded MSCI China and the Hang Seng Index, citing better corporate governance, improved geopolitical conditions, and Beijing’s vow to support the private sector.
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“We believe a structural regime shift is finally happening within China’s equity market, especially the offshore space,” Morgan Stanley said in a report. “We move from being deeply sceptical to cautiously more optimistic.”
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In a sign of performance divergence within China’s tech sector, Internet healthcare, big data and telecom services stocks continue to power ahead, but cloud computing and AI plays dropped.
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In Hong Kong, the Hang Seng Tech Index dropped 2.2%, but is still up 20% so far this month.
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