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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 1.7% and the Shanghai Composite Index gained 1.6% at the close, after both slid more than 7% on Monday.
Hong Kong's Hang Seng Index rose 1.5% after slumping 13.2% in the previous session, its steepest decline since the 1997 Asian financial crisis. The Hang Seng Tech Index added 3.8%, after plummeting 17% on Monday.
Beijing has publicly stepped up efforts to stabilise the market after U.S. President Donald Trump imposed a 34% tariff on China last week, while China responded with 34% levies on U.S. imports.
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 50 ETF, all saw trading volumes surge after spiking to their highest in a year on Monday.
Several Chinese state holding companies have followed suit and vowed on Tuesday to increase share investments, while a slew of listed companies announced share buy-backs to support prices.
MARKET STABILISATION MEASURES
China's financial regulator also plans to raise the upper limits for insurance funds' investment in the stock market, as part of action taken to increase support for capital markets.
"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.
The national team is likely to continue its support for the Chinese stock markets at least for the next two weeks ahead of an end-April meeting of China's key decision making Politburo, when more fiscal measures could be released, according to Shan Guo, partner of advisory firm Hutong Research.
Sentiment improved somewhat in Asia trading on Tuesday, with major markets starting to claw back recent heavy losses after policymakers stepped up support, and on hopes that Washington might be willing to negotiate some of its aggressive tariffs.
Japan's Nikkei 225 index rose 6% in a broad rally, while MSCI's broadest index of Asia-Pacific shares outside Japan was 0.4% firmer.
Investors are still closely monitoring how trade tensions between the world's two largest economies will develop with neither side showing willingness to back down so far.
China vowed to "fight to the end" with the U.S. on Tuesday, after Trump threatened to ratchet up tariffs on Chinese imports to more than 100%.
Prior to Tuesday's rebound, the blue-chip CSI 300 and the Shanghai Composite Index had both plummeted over 7%, while Hong Kong's Hang Seng Tech Index had dropped nearly 19% since what Trump calls his "Liberation Day" tariffs threatened to disrupt global trade and potentially trigger a global recession.
(Reporting by Jiaxing Li in Hong Kong; Editing by Jacqueline Wong, Kim Coghill and Sharon Singleton)
