Renewed trade war with the U.S. has collapsed Chinese stocks from 10-year highs

Shares of Chinese companies fell sharply in trading on October 13. The resumption of the trade war between Washington and Beijing undermined investors' appetite for risk and provoked profit taking in the Chinese stock market, which was at its highs over the past ten years.

China's blue-chip index CSI 300 and Shanghai Composite lost almost 2% after the opening of trading. Hong Kong's Hang Seng fell by more than 2%. Quotes of Alibaba fell by 3%, securities Tencent fell in price by 4.1%.

Amid a general sell-off early in the session, shares in China's strategic sectors, including rare-earth metals and semiconductor producers, rose, Reuters reports.

On October 10, Friday, US President Donald Trump responded to China's restriction of rare earth metals exports by promising to impose an additional 100 percent duty on Chinese imports from November 1 and tighten export controls on software shipments. The threats against Beijing caused a collapse in European and U.S. stock exchanges. The index of Chinese companies traded on Nasdaq collapsed by 6%.

China on Sunday said it was "not afraid" of a trade war with the United States and accused Washington of "classic double standards," CNBC reported. Trump tried to ease tensions by writing on social media the same day that "the U.S. wants to help China, not hurt it."

Market participants believe the sell-off in Chinese stocks amid renewed trade tensions between the world's two largest economies will provide a buying opportunity on the downturn, Bloomberg writes.

"From a technical perspective, the rise in [Chinese equities] since the beginning of the year has created the conditions for a correction. (...) Thus, the short-term decline is a good opportunity to increase the exposure to Chinese assets in the portfolio if it has been underweight," said Francis Tan, chief Asia strategist at Indosuez Wealth Management.

"The market sell-off is likely to continue. But it will create more attractive entry levels for stocks of Chinese companies related to artificial intelligence, data centers, semiconductors and equipment for their production. In the event of further escalation, we believe China has an advantage as its socialist system allows it to withstand pressure longer than the U.S.," Jefferies analysts Edison Lee and Nick Cheng wrote.

After Sunday's statement by President Trump that "everything will be fine" in trade relations with China, U.S. stock futures rose, recovering part of the Friday session's collapse. Exchange-traded contracts on the Dow Jones Industrial Average rose 0.9%, while futures on the S&P 500 and Nasdaq 100 added 1.2% and 1.6%, respectively.

This article was AI-translated and verified by a human editor