Hong Kong’s stock market saw a downturn as investors reacted negatively to China’s recent action plan aimed at stimulating long-term market growth. Despite initial optimistic gains, the prospect of renewed tariffs from US President Donald Trump further dampened investor sentiment.

As of 2:34 PM local time, the Hang Seng Index was down 0.5%, settling at 19,686.62 after peaking earlier with a 1.3% increase. Similarly, the Hang Seng Tech Index experienced a 1.5% decline, erasing a 1% rise recorded earlier in the session.

On the mainland, the situation was slightly more optimistic with the CSI 300 Index climbing 0.4% from its earlier highs of 1.8%, marking the most significant daily increase since mid-January. The Shanghai Composite Index also showed positive movement, rising by 0.7%.

Weakened enthusiasm was primarily linked to announcements made by Wu Qing, chairman of the China Securities Regulatory Commission (CSRC), detailing a new investment strategy. Starting this year, 30% of annual insurance premiums from new policy sales will be directed into China’s onshore markets, with plans for an increase of 10% each subsequent year for three years. A pilot program is set to mobilize at least 100 billion yuan (approximately US$13.8 billion) into the stock market within the next six months, with at least half earmarked for investment before the Lunar New Year festivities begin on January 29.

Despite these efforts, market analysts voiced skepticism about the effectiveness of such strategies in countering threats posed by Trump’s potential 10% tariff on Chinese exports set to take effect on February 1. According to Kai Wang, an equity market strategist at Morningstar, while large-cap companies may benefit from these investments, there remains a pressing need for clearer fiscal policy and resolution of the excess inventory crisis in China’s real estate sector for the market’s recovery to gain traction.

The real estate sector was notably affected, with prominent losses reported among major property developers. CK Hutchison Holdings saw a 2% decline to HK$39.20, while Sun Hung Kai Properties dipped 1.7% to HK$69.50. Country Garden faced a staggering loss of 14.4%, trading at just HK$0.42. The semiconductor giants were not spared, with Semiconductor Manufacturing International Corporation (SMIC) stumbling 6.7% to HK$39.30. Additionally, electric vehicle manufacturer Li Auto saw a 3.3% drop to HK$87.70, followed closely by BYD which fell 2.3%, closing at HK$270.20.

As market participants brace for more clarity on government policies and the broader implications of international trade relations, all eyes remain focused on upcoming developments that may influence the future trajectory of Hong Kong’s financial landscape.