Chinese technology stocks saw a sharp decline after former US President Donald Trump announced new restrictions on US investments in China’s tech sector, increasing concerns about rising geopolitical tensions. The move highlights the growing financial and technological divide between the world’s two largest economies.
On Tuesday, the Hang Seng Tech Index dropped 4.4%, marking its biggest fall since November. Alibaba Group Holding Ltd. fell 7.9% in Hong Kong after its American depositary receipts (ADRs) fell 10% overnight. The Nasdaq Golden Dragon China Index, which tracks US-listed Chinese stocks, also declined 5.2% in the last session.
This selloff threatens to reverse the strong rally seen in Chinese tech stocks this year. The market had been rising due to optimism surrounding DeepSeek, but investors are now adjusting their strategies in response to new geopolitical risks.
Trump’s Orders Impact Chinese Tech Investments
Over the weekend, Trump called for closer surveillance of US-listed foreign firms and the patterns of companies’ ownership. He also called on US pension and endowment funds to curtail investment in the technology sector of China.
Charu Chanana, the Chief Investment Strategist at Saxo Markets, explained that the AI-focused Chinese shares had fared well during 2024, yet orders of the US President might trigger profit booking and create worries regarding the AI supply chain.
Notwithstanding this dip, the Hang Seng Tech Index remains 25% higher this year. The majority of the Wall Street analysts assert that the shares of technology firms in China stand at a crossroads, especially after the meeting of President Xi Jinping with top tech business leaders. However, if the selling goes on, it will erode investors’ confidence and will shape future growth of the tech sector in China.
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Source: Moneycontrol.
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