China to fight till the end in tariff war: What should Hang Seng ETF investors do?

The escalating tariff war between the United States and China has triggered significant market volatility, particularly impacting Hong Kong's Hang Seng Index, which fell nearly 13% on Monday, far more than other major economies. While global markets have since staged a rebound, the Hang Seng has yet to recover meaningfully.

China has strongly condemned the United States' latest tariff threat, vowing not to yield to what it described as economic intimidation.

“The U.S. threat to escalate tariffs against China is a mistake on top of a mistake, which once again exposes the U.S.'s blackmailing nature. China will never accept this. If the U.S. insists on going its own way, China will fight it to the end,” a spokesperson from China’s Ministry of Commerce said on Tuesday.

Mirae Asset Hang Seng TECH ETF FoF, the only ETF based on the Hang Seng Index, was the worst performer over the past day, delivering a negative return of around 17.40%. It was followed by Axis Greater China Equity FoF, which lost 9.46% in the same period.

Nippon India Taiwan Equity Fund declined 8.89%, while HSBC Global Emerging Markets Fund fell 8.79%.
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According to Feroze Azeez, Deputy CEO of Anand Rathi Wealth Limited, investing in international funds—especially based on recent rallies—is not advisable. He noted that recent gains in global funds, particularly China-based ETFs, have been largely driven by liquidity flows rather than any meaningful structural improvements in fundamentals.

The Hang Seng Index has declined by approximately 13.22% over the past three days and 14.23% over the past week. It is down 6.23% over the last month and has dropped 1.15% so far in the current calendar year.

Azeez added, “The Nifty 50 stands out with better market efficiency compared to the Shanghai Composite and Hang Seng indices. With an efficiency ratio of 1.22, the Nifty 50 clearly outperforms the Shanghai Composite (-0.69) and Hang Seng (-1).”
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He also pointed out that international markets are driven by a range of global and external factors, making it difficult for retail investors to track them closely or make well-informed decisions.

“As per IMF projections, India is set to grow at 6.5% to 7% in the coming years, which is the highest among both developed economies and emerging ones like China. Considering these factors, we do not recommend allocating a significant portion to international funds,” said Feroze Azeez, Deputy CEO of Anand Rathi Wealth.

Over the past month, the Mirae Asset Hang Seng Tech ETF has declined by 27.77%, and by 16.45% over the last six months. Notably, all international funds have delivered negative returns in the past one month.

Considering the performance of international funds, Feroze Azeez advises, “For those looking for global diversification, exposure can be limited to around 5% of the overall portfolio.

Instead, investors can consider a range of domestic diversified equity funds to gain exposure across various categories and sectors—helping generate strong alpha and returns over the long term.”