Hong Kong Stocks Drop as U.S.-China Tensions Boil Over
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Hong Kong stocks plunged Monday morning as escalating U.S.-China tensions rattled investor confidence.
At the midday close, the Hang Seng Index was down 3.5%, while the Hang Seng Tech Index fared worse, dropping 4.5%. By the end of the afternoon session, losses had narrowed, with the indexes closing down 1.5% and 1.8%, respectively.
The broad sell-off hit nearly all sectors, and tech giants were battered. The market rout follows a sudden and sharp deterioration in bilateral relations, reversing early October optimism and raising fears of a prolonged conflict.
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- Hong Kong stocks dropped sharply on U.S.-China tensions, with the Hang Seng Index down 3.5% midday and closing 1.5% lower.
- Tit-for-tat measures included China’s new export license rules and a U.S. announcement of 100% tariffs on Chinese goods.
- Morgan Stanley and JPMorgan expect ongoing risk aversion but see strategic investment opportunities if a truce is reached or sentiment improves.
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Who’s Who
- Morgan Stanley
- Morgan Stanley, a major investment bank, believes a "tactical truce" is the most likely outcome of escalating U.S.-China tensions, though it expects a period of heightened rhetoric first. It suggests that if the MSCI China Index drops significantly while corporate earnings remain strong, investors should "buy the dip." In a "decoupling" scenario, Morgan Stanley recommends a heavily A-share-skewed strategy focusing on defensive, large-cap domestic stocks.
- JPMorgan
- JPMorgan highlighted that risk aversion would likely be a primary theme in the coming weeks. However, deepening risk-off sentiment could present an opportunity by year-end to increase holdings in Chinese stocks. The bank sees China's policy support, innovation, and measures against excessive competition as positive structural factors.
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What Happened When
- Oct. 2, 2025：
- U.S. Treasury Secretary Scott Bessent mentioned the possibility of China buying American soybeans and an informal meeting between the two countries’ leaders.
- Oct. 9, 2025：
- China’s commerce ministry announced new export license requirements for rare earths and related technology.
- Oct. 10, 2025：
- U.S. President Donald Trump said he would impose an additional 100% tariff on Chinese goods and place export controls on key software, effective Nov. 1, 2025.
- Oct. 12, 2025：
- Morgan Stanley issued a research note stating its base case is a 'tactical truce' after a period of escalating rhetoric.
- Morning, Oct. 13, 2025：
- Hong Kong stocks plunged; Hang Seng Index and Hang Seng Tech Index suffered sharp declines.
- Midday, Oct. 13, 2025：
- At the midday close, Hang Seng Index was down 3.5%, Hang Seng Tech Index was down 4.5%.
- Afternoon, Oct. 13, 2025：
- By the end of the afternoon session, losses had narrowed with Hang Seng Index closing down 1.5% and Hang Seng Tech Index down 1.8%.
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