China, Hong Kong stocks rise with regional markets, Beijing support

HONG KONG (Reuters) -China and Hong Kong stocks regained some ground on Tuesday, steadying in the wake of stronger regional markets and government-led support after a brutal selloff triggered by concerns over trade tariffs.

China’s blue-chip CSI 300 Index climbed 1% and the Shanghai Composite Index gained 0.9% at midday trading break, after both slid more than 7% on Monday.

Hong Kong’s Hang Seng Index rose 1.6% after slumping 13.2% in the previous session, its steepest decline since the 1997 Asian Financial Crisis. The Hang Seng Tech Index added 3.6%, after plummeting 17% on Monday.

Beijing has publicly stepped up efforts to stabilise the market after U.S. President Donald Trump slapped a 34% tariff on China last week, while China responded with 34% levies on U.S. imports.

On Tuesday, China vowed not to bow to "blackmail" from the United States after Trump said he would impose an additional 50% duty on U.S. imports from the world’s No.2 economy on Wednesday in response to Beijing’s decision to match the duties Trump unveiled last week.

Sovereign fund Central Huijin Investment, dubbed the "national team", said it has bought China-listed shares via exchange-traded funds and will continue to increase holdings to "safeguard the smooth operation of the capital market."

ETFs known to be favoured by Huijin, including Harvest CSI 300 ETF, ChinaAMC CSI 300 ETF and E Fund SSE (LON: SSE ) 50 ETF, all saw trading volumes spike to their highest in a year on Monday.

Several Chinese state holding companies have followed suit and vowed on Tuesday to increase share investment, while a slew of listed companies announced share buy-backs to support prices.

"In extreme market conditions, we believe institutions like Central Huijin still have substantial capacity to further increase holdings to stabilise the market," UBS China equity strategist Lei Meng said in a note.

Such long-term capital acts as a stabilizing force in the market and should help to reduce equity risk premiums, he added.

Sentiment improved somewhat in Asia trading on Tuesday with major markets starting to claw back recent heavy losses after policymaker stepped up support, and on hopes that Washington might be willing to negotiate some of its aggressive tariffs.

Japan’s Nikkei 225 index rose 5% in a broad rally, while MSCI’s broadest index of Asia-Pacific shares outside Japan was 0.2% firmer.