The Hang Seng Index tumbled 441 points, or 1.9%, to close at 23,108 on Tuesday, snapping an eight-session winning streak as broad-based declines swept across all sectors.
Hang Seng under pressure at finish
The pullback came amid a wave of profit-taking after the benchmark touched a one-and-a-half-month high in the previous session, with investors choosing to lock in gains amid mounting uncertainties.
While the recent Sino-U.S. trade truce exceeded market expectations and initially fueled optimism, traders grew increasingly uneasy about the durability of the agreement and what might unfold once the temporary pause in hostilities ends. Market participants remained cautious, wary that unresolved structural issues between the world's two largest economies could re-emerge, reigniting tensions.
Adding to the negative sentiment was a drop in U.S. stock futures ahead of the release of key U.S. inflation data later today, which could have significant implications for the Federal Reserve’s monetary policy outlook. Investors feared that a higher-than-expected inflation print might dampen global risk appetite, weighing on equity markets further.
Concerns on deflationary risks in China intensified
Meanwhile, fresh concerns about deflationary risks in China intensified, as data showed consumer prices fell for the third consecutive month in April, while producer prices recorded their steepest decline in six months. The weak inflation figures underscored persistent demand weakness and stoked fears of a prolonged economic slowdown, dampening sentiment across the region.
Limiting deeper losses, however, were remarks from President Trump, who stated he plans to speak directly with Chinese President Xi Jinping in the coming days, raising hopes that high-level diplomacy could prevent a relapse in trade tensions.
On the corporate front, Sunny Optical led the declines, plunging 7.6% after reporting a 14.1% year-on-year drop in April handset camera module shipments, signaling sluggish demand in the smartphone sector. Other major laggards included BYD Electronic, which slumped 7.0%, Meituan down 5.0%, Xiaomi and SMIC both falling 4.2%, and Tencent Holdings losing 2.1%.
