SHANGHAI: China and Hong Kong stocks dropped on Thursday following US President Donald Trump’s fresh tariff threats, though losses were limited as analysts said the rally in Chinese stocks, driven by the DeepSeek breakthrough, still has momentum.
China’s blue-chip CSI300 Index ended the session down 0.3%, while the Shanghai Composite Index was flat, as Beijing left benchmark lending rates unchanged at the monthly fixing.
Hong Kong’s benchmark Hang Seng Index declined 1.6%, dragged by a sharp correction in technology stocks.
Markets in Asia wobbled after Trump said he would announce tariffs related to lumber, cars, semiconductors and pharmaceuticals “over the next month or sooner.”
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.
Markets dropped as traders locked in profits after recent gains, underpinned by Chinese tech shares following the success of start-up DeepSeek, whose low-cost, breakthrough AI model made a global impact.
But investments banks, including Morgan Stanley, see further upside in China stocks. The Wall Street bank upgraded MSCI China and the Hang Seng Index, citing better corporate governance, improved geopolitical conditions, and Beijing’s pledge to support the private sector.
“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.”
In a sign of performance divergence within China’s tech sector, stocks from internet healthcare, big data and telecom services continue to power ahead, but cloud computing and AI plays weakened.
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