China Markets

Hong Kong stocks fall deeper into bear territory amid trade war uncertainty

Key Points
  • Hong Kong's Hang Seng index slides further into bear territory on Tuesday as the trade war between Washington and Beijing continues to create uncertainty in Greater China markets.
  • Last Friday, U.S. President Donald Trump announced that he was ready to impose more tariffs on Chinese imports, on top of those he had previously announced.
  • One expert warns that stocks could go "substantially lower" if the proposed tariffs all go into effect.
Pedestrians are reflected in a mirror next to a screen showing the closing figures for the Hang Seng Index in the Central district in Hong Kong on July 3, 2018.
Vivek Prakash | AFP | Getty Images

Hong Kong's benchmark stock index on Tuesday fell further into bear market territory for the second consecutive day in a row as jitters from the ongoing trade war between Washington and Beijing continued to rock markets in the Greater China region.

The Hang Seng index slid a further 0.72 percent on Tuesday to close at 26,422.55 after seeing an earlier intraday low of 26,394.87.

In its component sectors, services and materials were among the hardest hit as they both saw losses of more than 2.4 percent.

The downward trend faced by the Hang Seng is linked to the "big uncertainty" created by the ongoing U.S.-China trade war, said James Cheo, a senior investment strategist at Bank of Singapore.

Echoing Cheo's sentiment, Hao Hong, a managing director and head of research at Bank of Communications International, told CNBC that the market is "finding it difficult" to price in any recent developments on the dispute.

To illustrate his point, Hong pointed to Sept. 7, when a public comment period regarding U.S. tariffs on $200 billion of Chinese imports ended. While some had expected the round of tariffs to take effect from the moment the comment period ended, Hong said: "For some reason, it hasn't come out yet."

Instead, U.S. President Donald Trump announced on Friday that he was "ready" to place tariffs on an additional $267 billion in Chinese imports on top of the $200 billion that had already been targeted.

Asked about his overall outlook for the Hang Seng index, Hong said the bearish trend is likely to persist from here, adding that he wouldn't put his money into the market "just yet."

"It would be a pretty bad scenario" if all the proposed tariffs go into effect, Hong said, warning that "stocks can go substantially lower from here."