Chinese markets displayed surprising resilience in the face of escalating trade tensions, underscoring how investors have grown accustomed to tit-for-tat salvos between Washington and Beijing.
While President Donald Trump floated an additional 100% tariffs on China — a deja vu of the April threats that sent markets into a tailspin — the CSI 300 benchmark for onshore shares ended Monday down just 0.5%. A sharp rebound in the afternoon session pointed to active dip-buying by investors.
US-listed Chinese stocks are also on track to recoup some lost ground, with the exchange-traded KraneShares CSI China Internet ETF rising 3.8% in premarket trading. The ETF declined 7.1% on Friday amid Trump’s tariff threats.
These moves suggest investors see renewed tensions as strategic posturing by both parties to gain leverage ahead of an eventual deal. It’s a lesson learned during the April turmoil — when a historic rout was followed by a sustained bull run. Also keeping investors sanguine were signals from the Trump administration over the weekend that it’s open to talks with Beijing.
The retreat may be welcomed by investors who missed out this year’s rally. Enthusiasm over China’s advances in artificial intelligence and the growing strength of domestic chipmakers has helped offset lingering geopolitical concerns. Shares of tech heavyweights like Alibaba Group Holding and chipmakers Hua Hong Semiconductor more than doubled this year through Friday.
See also: China brands are now global competition
Chinese Stocks Stage Sharp Intraday Rebound
“The fast de-escalation in April meant that there is likely to be more investors that ‘bottom-fish’ this time,” James Wang, head of China equity strategy research at UBS, wrote in a note.
Some analysts had braced for a bleak Monday for Chinese assets after Trump said he would impose an additional 100% tariff on the Asian nation as well as export controls on “any and all critical software” beginning Nov 1. The announcement, made just hours after he threatened to cancel a planned meeting with President Xi Jinping, was in response to Beijing’s newly expanded export curbs on certain rare earth minerals.
See also: Fomo builds as Alibaba extends US$250 bil AI-fueled comeback
While stocks started Monday’s session down steeply, a V-shaped rebound soon took hold. The CSI 300 Index erased most of its 2.7% drop, with chip, software and metal stocks rallying. The Hang Seng China Enterprises Index bounced off intraday lows to fall 1.5%.
The losses were modest compared to previous tariff-driven routs. The CSI 300 tumbled 7% and the Hang Seng China gauge nearly 14% on April 7, when selloff pressure peaked following Trump’s reciprocal tariffs, which were soon postponed or adjusted lower.
HSCEI's Estimated P/E Ratio at Its Highest Since 2021
While investors remain broadly sanguine, signs of caution are emerging as Chinese stocks appear vulnerable to a pullback following this year’s blistering rally. Valuations have climbed, with the Hang Seng China gauge trading at nearly 11 times its forward earnings estimates, above its five-year average of 8.7 times.
“If the tariffs prove to be largely a negotiating tactic, the market could see a short-term shock followed by a buying opportunity,” said Dilin Wu, a strategist at Pepperstone Group. “But if the measures are fully implemented, costs for Chinese exporters would rise and profits come under pressure, potentially triggering a new wave of volatility.”
Other assets were also relatively stable on Monday. The yuan edged higher against the dollar, encouraged by the Chinese central bank’s stronger fixing. China’s 30-year government bond futures pared gains to end the day 0.3% higher.
“It’s clear that the rhetoric on both sides is part of bargaining chips ahead of an intended meeting towards the end of the month, so it’s too early to assume worst cases,” said Xin-Yao Ng, a fund manager at Aberdeen Investments.
