Recent Xiaomi Accident Leads to Hesitation on Smart-Driving ModelsMarket Talk

Hong Kong stocks tumbled on Monday, as the global market sell-off deepened amid worries over the effects of a tariff war between the world's two largest economies.

The Hang Seng Index endured its worst single-day decline since 2008, plunging 13.22% to close at 19,828.30. The Hang Seng China Enterprises Index slumped 13.75% to 7,262.72.

The rout came after US President Donald Trump unveiled sweeping tariffs on almost all countries.

US tariffs announced last week are poised to raise duties on almost all goods from China to at least 54%, prompting Beijing to retaliate with a 34% levy on all US imports.

Notably, the US tariffs also apply to Hong Kong exports, despite the city being a free port that maintains a distinct customs territory from mainland China.

China's broad retaliatory measures also included slapping export curbs on key rare earth elements and adding 11 more American firms to its unreliable entities list.

"Friday was a public holiday in Hong Kong, so what we are seeing is the reaction to Trump's tariffs and China's retaliation. So it's a double whammy," Carlos Casanova, a senior economist with UBP in Hong Kong, was quoted by Al Jazeera as saying.

Economists at Capital Economics said Beijing's shift toward a more "aggressive, escalatory" stance makes a near-term deal to end the trade war between the two superpowers "highly unlikely."

The escalating tariff war has led to a steep sell-off, with the technology, ecommerce, and banking stocks among the hardest hit.

Shares of e-commerce giant Alibaba and food delivery firm Meituan sank 18% and 15%, respectively, on Monday.

Technology heavyweights Xiaomi and Tencent tanked 21% and 13%, respectively, while chipmaker SMIC retreated 16% in Hong Kong.

In the banking sector, HSBC , Standard Chartered and Bank of China's fell 15%, 16% and 11%, respectively.

Xiaomi may see promising growth in its smartphone, internet-of-things and electric-vehicle businesses, Daiwa analyst John Choi writes in a note. The company's recent share placement of 800 million shares will be used for business expansion, R&D investment in areas including EVs, autonomous driving and AI. Xiaomi is better positioned than its peers to weather the storm of the ongoing tariff war between China and U.S. due to its limited revenue exposure to the U.S. market, Daiwa says. The brokerage upgrades the stock rating to buy from outperform but cut target price to HK$60.00 from HK$65.00 to factor in changed earnings per share forecast for 2025-2026. Shares last at HK$37.45. (jiahui.huang@wsj.com; @ivy_jiahuihuang)

Fitch Ratings has changed Xiaomi's outlook to positive from stable while affirming its long-term foreign and local currency issuer default ratings at BBB, Fitch Ratings said in a Wednesday release.

The rating actions reflect the consumer electronics company's robust free cash flow, expanding internet of things (IoT) segment, and an increased smartphone market share.

Moreover, the company's electric vehicle (EV) expansion has strengthened its brand awareness, according to Fitch.

However, the EV investments continue to have medium-term risks, with the segment expected not to make a profit for a number of years due to tight competition and high research and development (R&D) and capital expenditure needs, Fitch said.

The rating agency expects the company's free cash flow to exceed 15 billion yuan annually in the next three years, above the historical average.

Meanwhile, Fitch expects the company's profitability to be supported by higher-margin products and increased advertising revenue.

Xiaomi's diversified operations, including internet services and IoT products, mitigate the cyclical nature of the smartphone market, contributing to a strong financial profile, Fitch said.

Hong Kong stocks ended flat in negative territory on Wednesday as investor sentiment turned cautious ahead of an announcement from Washington regarding new reciprocal tariffs.

The Hang Seng Index closed little changed at 23,202.53. The Hang Seng China Enterprises Index ended fractionally lower at 8,531.51.

Global markets toiled in uncertainty as investors await news on reciprocal tariffs by the US to be announced later in the day.

Just last week, the Donald Trump-led US government announced its plans to introduce a 25% levy on all imported vehicles and auto parts.

The tariffs will have a significant impact on affected industries, taking their toll on profit, the SCMP reported citing a report from Barclays last week.

In corporate news, Xiaomi fell 4% amid news of an investigation regarding the death of three people in an accident involving one of its SU7 electric vehicles on March 29.

Lei Jun, founder of the tech firm, said the company will cooperate with authorities in the investigation, according to a Reuters report on Tuesday.

Xiaomi founder Lei Jun said the company will cooperate with authorities investigating the death of three people in an accident involving one of its SU7 electric vehicles, Reuters reported Tuesday.

"No matter what happens, Xiaomi will not evade," Reuters quoted Lei as saying.

Before the March 29 accident, the car was travelling on Navigate on Autopilot intelligent-assisted driving mode and was cruising at 116 kilometers per hour, the report said.

Xiaomi said in a police report the autopilot system was flagging obstacles ahead, and a driver tried to slow it down but then hit a cement pole at 97 kilometers per hour, the report said.

Shares in the tech company fell 1% during Wednesday's late morning trading.