Asia-Pacific stock markets surged on Tuesday, rebounding from Monday’s heavy losses triggered by renewed trade tensions between the United States and China. President Donald Trump’s aggressive tariff strategy, including threats of an additional 50% levy on Chinese imports, has created ripples across global financial markets, with investors weighing the impact on economic stability and trade.
Market Performance Across Asia
Asian equities showed signs of recovery after Monday’s steep sell-off, which saw Hong Kong’s Hang Seng Index suffer its worst single-day drop since 1997. On Tuesday, key indices rallied as follows:
- Japan: The Nikkei 225 soared by 6.03% to close at 33,012.58, with the broader Topix index gaining 6.26%. The strong performance came after reports that President Trump had spoken with Japanese Prime Minister Shigeru Ishiba about trade negotiations.
- Hong Kong: The Hang Seng Index climbed 1.51% to close at 20,127.68, while the Hang Seng Tech Index jumped 4.49%, signaling hopes for a tech sector rebound.
- China: Mainland China’s CSI 300 rose by 1.71%, closing at 3,650.76 despite ongoing uncertainty surrounding U.S.-China trade relations.
- South Korea: The Kospi edged higher by 0.26% to 2,334.23, while the small-cap Kosdaq gained 1.1%.
- Australia: The S&P/ASX 200 jumped 2.27% to close at 7,510, buoyed by optimism in the resource and financial sectors.
Trump Tariff Threats Shake Investor Confidence
On Monday, President Trump escalated tensions by threatening to impose an additional 50% tariff on Chinese imports if Beijing did not retract its duties on U.S. goods. This move follows the unilateral 10% tariff introduced by the U.S. over the weekend. In response, China’s Commerce Ministry vowed to “fight to the end,” pledging countermeasures to safeguard its economic interests.
The escalating trade war has reignited fears of a global economic slowdown, with analysts warning of potential long-term damage to investor confidence and supply chains.
“The renewed trade war fears have reignited concerns of a global economic slowdown, shattering already fragile investor confidence,” said Murthy Grandhi, an analyst at GlobalData.
Currency and Commodities Impact
The fallout from the tariff announcements extended to currency and commodity markets:
- Chinese Yuan: The onshore yuan depreciated to its weakest level since September 2023, trading at 7.3363 against the U.S. dollar. Analysts believe the People’s Bank of China (PBOC) may intervene to stabilize the currency.
- Oil Prices: U.S. crude oil prices fell further, with West Texas Intermediate (WTI) dropping 2.08% to $60.70 per barrel. Concerns over a potential global recession weighed heavily on energy markets.
Indonesia and Vietnam Witness Sharp Declines
While most Asian markets rebounded, some, like Indonesia and Vietnam, continued to face significant headwinds:
- Indonesia: The Jakarta Composite Index fell 9.35% after trading resumed following a temporary circuit breaker. The rupiah also hit a record low of 16,850 against the U.S. dollar.
- Vietnam: The benchmark VN-Index dropped 6.48%, reflecting heightened investor caution following the holiday break.
Singapore PM Warns of ‘Disastrous’ Trade War Consequences
Singapore Prime Minister Lawrence Wong cautioned against the deepening trade disputes, warning of “disastrous” global consequences if tensions escalate. Singapore, a strong proponent of free trade, has been adversely affected by the U.S. tariffs, with its Straits Times Index trading 1.7% lower on Tuesday.
“The U.S. may have decided to turn protectionist, but the rest of the world does not have to follow the same path,” Wong said.
Tech Stocks and ‘Bottom Fishing’ Opportunities
Tech stocks showed resilience, with Samsung Electronics gaining 3% after reporting better-than-expected Q1 profit estimates. Meanwhile, investment firms like Aberdeen are keeping an eye on undervalued equities in Asia.
“We are watchful of opportunities for bottom fishing across Asian equity markets,” said Pruksa Iamthongthong of Aberdeen Investments.
Outlook: Volatility Ahead
While Tuesday’s rebound offered some relief, market experts caution that volatility is far from over. With U.S. interest rate decisions and further tariff announcements on the horizon, investors are bracing for a bumpy ride.
“Investors need to get comfortable being uncomfortable with the volatility ahead,” said George Boubouras of K2 Asset Management.
As the U.S.-China trade war escalates, the path forward will depend heavily on policy clarity and diplomatic negotiations to restore stability in financial markets.
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