Financial markets in Hong Kong and across the border dived on Monday as markets around the world crumbled in the face of a widening global trade war and fears it will unleash a deep recession.

The Hang Seng index slumped more than 10 percent in morning trade which, if sustained, would make for the benchmark's largest daily fall since the 2008 global financial crisis.

Banking stocks collapsed, with Hong Kong-listed shares of HSBC and Standard Chartered tumbling 15 percent.

The CSI300 blue-chip index fell more than 5 percent with selling in nearly every sector.

The yuan slipped to its lowest since January and bonds rallied sharply.

China, which is now facing US tariffs of over 50 percent, responded in kind on Friday by slapping extra levies on US imports.

Mainland indexes of solar companies and household appliance makers notched losses around 10 percent.

The Hang Seng volatility index shot to its highest since October.

Shares of online giants Alibaba and Tencent were down more than 8 percent.

"It's a harsh time when markets go down so dramatically," said Andrew Sullivan, founder of Asian Market Sense, who noted that the latest plunge came as investors race to liquidate some of their shares in the face of a cash crunch following a market meltdown, especially for those who trade using margin financing, or borrowing money from brokers to purchase an investment.

"But one should get over the initial panic of wanting to sell, because a lot of the time these markets rebound within days or weeks," he said.

"That said, this current situation with tariffs being imposed by Trump, and then retaliatory tariffs by China does indicate that this is a situation that's unlikely to resolve itself anytime soon."

For his part, Alex Wong, director of Alex KY Wong Asset Management, said "the [market sell-off] was beyond my expectation.

"This is a liquidation sale as people sought to exit [the market]. But the magnitude of the decline was more than expected."

He expects Beijing to offer stimulus measures in the short term to stabilise the market, such as a cut in the reserve requirement ratio for banks or a tax cut as part of a package of stronger fiscal support.

Noting that the chance of the global economy to enter a recession this year has increased to at least 60 to 70 percent following the tit-for-tat tariff disputes between the world's two largest economies, Wong said a deal between the two sides is needed but difficult to realise.

"China knows that if it complies with US demands, this will reinforce Trump's ego and he will ask for more later on, that's why China took a hard stance now. It would be very difficult for both sides to reach a deal.

"We probably will be in a bear market for a long time," Wong said.

Separately, Sullivan noted that the a key event to follow is whether the US Congress representatives from both parties will stop Trump from implementing the reciprocal tariffs – by revoking the International Emergency Economic Powers Act and the National Emergency Act that Trump used to impose the tariffs.

"Historically, if you saw the VIX index (a barometer for market uncertainty) is above 32, 33 percent, you'd normally get a policy changed by the government."

"[But] the VIX index on Friday got above 40 percent, and we've seen no change of Trump turning about or evoking his trade policy. So it's a very difficult position," he said.

"But if they [Congress members] feel that their own caucuses and electorate are going to turn against them, they will have to make a choice.

"Do they stick with Trump who is unlikely to have a third term, or do they stick with their electorate, and support them and go against trump?

"That'll be a very interesting thing that we're likely to see in the next couple of weeks."
(with additional reporting from Reuters)

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Last updated: 2025-04-07 HKT 13:59