Asian markets experienced a broad decline on Tuesday, as President Donald Trump’s actions to curb Chinese investments in key sectors and impose new tariffs on Canada and Mexico prompted investors to reduce risk exposure. The downward trend in US stocks also weighed on sentiment.
Equity indexes in Hong Kong and mainland China dropped at the open, with the Hang Seng Index falling 2.8%, and a regional gauge of Asian stocks posting a second consecutive day of losses. The yield on 10-year US Treasury bonds fell by two basis points to 4.4%, while gold prices hit a record high on rising demand for safe-haven assets.
Investor sentiment soured after Trump unveiled a memorandum that instructed a key US government committee to restrict Chinese investments in strategic sectors, such as tech, energy, and infrastructure. This move has raised concerns that it could undermine the rally in Chinese tech stocks, which had been buoyed by optimism around AI developments like DeepSeek and President Xi Jinping’s meeting with corporate leaders.
Trump’s directive sets the stage for a more assertive use of the Committee on Foreign Investment in the United States (CFIUS), a secretive panel tasked with reviewing foreign investments in US companies. The memorandum emphasizes blocking Chinese affiliates from investing in critical US industries, including technology, healthcare, agriculture, energy, and raw materials.
“This could be a key week for a stock market that’s mostly been trading sideways for more than two months,” said Chris Larkin from E*Trade. The uncertainty around these US-China tensions is expected to weigh on global equity markets, especially in Asia.
In Hong Kong, Alibaba Group Holding Ltd. was hit hard, falling by 7.9% in local trading, while its American depositary receipts (ADR) dropped 10%. The stock’s decline followed a broader selloff in Chinese tech shares, which had surged earlier this year, fueled by positive sentiment toward AI and other growth drivers.
Meanwhile, Japan’s trading houses, including Mitsubishi Corp. and Marubeni Corp., saw a rally, boosted by Berkshire Hathaway’s mention of potentially increasing its stake in these companies in a recent letter to shareholders.
Elsewhere in Asia, the Bank of Korea lowered its seven-day repurchase rate by 25 basis points to 2.75%, a move that had been widely anticipated.
In addition to the economic uncertainties, geopolitical tensions are also adding to market volatility. Trump’s recent comments on Russia-Ukraine peace talks and his confirmation that tariffs on Canada and Mexico are “on time” have raised concerns among global investors.
As US stocks closed lower, with the S&P 500 dropping 0.5%, the Nasdaq 100 falling more than 1%, and the Dow Jones Industrial Average showing volatility, traders are anticipating potential earnings reports from major tech companies, including Nvidia, which could influence market sentiment.
The Federal Reserve’s preferred inflation gauge is due later this week, with analysts expecting a slowdown in price increases. However, any glimmers of progress on inflation are unlikely to change the cautious stance of the Federal Reserve in the near term.
Oil prices inched higher amid geopolitical uncertainties, while gold prices remained strong as investors flocked to the precious metal for security.
In conclusion, the combination of heightened geopolitical risk, particularly between the US and China, along with concerns over global inflation and market volatility, is driving uncertainty across Asian markets and beyond.
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