Market Updates
China-Japan Trade Tension Flare-Up Halts Market Rally
Li Chen
07 Jan, 2026
Hong Kong
Stocks in China and Hong Kong faced headwinds after tensions flared between Japan and China.
The Hang Seng Index decreased 1%, and the mainland-focused CSI 300 index declined a fraction, and China imposed additional trade restrictions on shipments to Japan.
China's commerce ministry said exports of goods with a potential military use to Japan would face immediate sanctions.
The move is likely to be followed up by additional sanctions restricting the sale of rare earth-related products in the near future.
The latest trade tension episode between two neighboring countries clouded the recent market rally that has been carried over from the last year.
China's technology stocks extended 2025's gains amid a shift in allocation by global fund managers chasing more attractive valuations.
Moreover, investors are hoping that China's policymakers could provide additional support for the moribund property market, as prices continue to weaken in all major cities apart from Beijing and Shanghai.
Benchmark indexes in Tokyo edged lower 0.7%, but markets in Seoul, Sydney, Jakarta, Bangkok, and Mumbai traded in a tight range.
China Indexes and Stocks
The Hang Seng Index decreased 1% to 26,431.05, and the mainland-focused CS 300 index fell 0.02% to 4,789.05 amid rising geopolitical tensions.
Alibaba Group decreased 4.4% to HK $144.60, Tencent Holdings decreased 2% to HK $620.0, and Baidu Inc. fell 4.2% to HK $146.40.
Zijin Mining Group increased 1.4% to HK $38.86, Aluminum Corporation of China gained 3.2% to HK $13.68, and China Nonferrous Mining Corp. added 1.7% to HK $15.60.
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