Hang Seng Index and Nikkei 225: Markets Diverge on US Tariff and Tech Sanctions

US Markets Tumble on Tariff Shock

US equity markets fell sharply on Wednesday, March 26, as investors reacted to US tariff developments. The Nasdaq Composite Index slid by 2.04%, while the Dow and the S&P 500 dropped 0.31% and 1.12%, respectively.

On March 26, President Trump announced a 25% tariff on all car imports, marking a significant escalation in the global trade war. Rising tariffs could send import prices and inflation higher, delaying potential Fed rate cuts.

Markets grew wary of a prolonged high-rate environment that may erode corporate earnings. The announcement also added to uncertainty, particularly after Trump had previously signaled a softer stance just two days earlier.

Asian Market Implications: Asian markets opened mixed on Thursday, March 27, as investors considered the latest tariff developments.

US Targets China’s Tech and AI Space

On March 26, the US government blacklisted over 50 Chinese tech firms, targeting China’s AI ambitions. Beijing’s response was moderate, urging the US to stop generalizing national security.

The news coincided with China Mobile and Alibaba announcing a partnership focused on AI data centers, cloud computing, and AI-related services.

In the aftermath of Wednesday’s announcement, China’s Vice Premier Ding Xuexiang pledged greater support for the property and stock markets. He also vowed to speed up the advancement of technology self-reliance.

Beijing’s policy support has remained a key factor underpinning sentiment in the Hong Kong and Mainland China markets since Trump’s election win.

Hang Seng Index Climbs Despite Trade Tensions

In Asia, the Hang Seng Index gained 1.05% on Thursday morning as investors brushed aside Trump’s auto tariffs and blacklisting of Chinese tech stocks. Beijing’s moderate response to the latest US maneuvers tempered fears of a full-blown US-China trade war. Further pledges from Beijing to support the tech space, the stock markets, and the real estate sector also boosted demand for Hong Kong and Mainland-listed stocks.

• The Hang Seng Mainland Properties Index advanced 1.25%, while the Hang Seng Technology Index gained 1.34%.
• Tech giants Alibaba (09988.HK) and Baidu (09888.HK) rallied 1.62% and 3.11%, respectively.
• Auto stocks moved higher despite US tariffs, with BYD Company Ltd. (01211.HK) and Li Auto Inc. (02015.HK) up 2.31% and 2.43%, respectively.

Mainland China’s equities also posted morning gains, with the CSI 300 and Shanghai Composite Index rising 0.42% and 0.31%, respectively.

Brian Tycangco, editor/analyst at Stansberry Research, commented on the latest tariffs:

“Japan and Mexico, which account for a combined 47% of US auto imports by units, will bear the brunt of these new tariffs. About 40% of US domestic auto sales are from imported vehicles. These are mostly lower priced, sub-compact and compact autos, light trucks and SUVs that would not be practical to manufacture in the US due to high costs. Ford, GM, BMW, VW, Honda – all are in the firing line.”

However, Chinese automakers may also face headwinds, given their investments in Mexico-based manufacturing.

Nikkei Index Slips as Autos and Tech Slide

Japan’s Nikkei Index dropped 0.94% on Thursday morning as tariff concerns dragged auto and tech stocks lower. However, a weaker Japanese Yen provided some cushion, with the USD/JPY rising 0.44% to 150.553 on March 26.

Softbank Group (9984) and Tokyo Electron (8035) tumbled 3.94% and 2.10%, respectively. Japan’s automakers also suffered losses. Nissan Motor Corp. (7201) fell 1.84%, while Honda Motor Corp. (7267) slid by 3.01%.

ASX 200 Tracks Wall Street Lower as Tech Stocks Slide

Australia’s ASX 200 declined by 0.51%, tracking Wall Street’s overnight losses. Tech stocks led the decline amid fears of further trade restrictions. Climbing US Treasury yields, boosted by the tariff announcement, also weighed on demand for high-yielding bank stocks.

• Banking Sector: Commonwealth Bank of Australia (CBA) fell 0.93%, while ANZ (ANZ) declined by 0.65%.
• The S&P/ASX All Technology Index dropped 2.52%.

Outlook: Markets Watch Tariffs and Central Banks

Markets remain fixated on tariff escalations, potential retaliations, and central bank signals. Renewed US-China trade tensions could impact the global economy and demand for Chinese goods, dampening risk sentiment. However, demand concerns may push Beijing to roll out new stimulus. Such measures could support stocks in Hong Kong and Mainland China.

Meanwhile, forward guidance from major central banks remains pivotal as inflation risks and geopolitical pressures muddy the path ahead.

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