Did the Market Overreact to Chinese Assets? Analysts Say Now Is the Best Time to Buy!

TradingKey - After former U.S. President Donald Trump renewed threats of significantly raising tariffs on China, the Nasdaq Golden Dragon China Index plunged over 6% last Friday — its largest single-day drop since April — dragged down by tech, semiconductor, and AI data center-related sectors.

However, several market analysts argue that this sell-off represents a healthy correction, creating an attractive opportunity for investors to buy on weakness. This view was supported by Monday’s trading in Asian markets.

At the close of mainland China trading, major indices recovered from early losses:

• The Shanghai Composite fell 0.19%,
• The Shenzhen Component dropped 0.93%,
• The ChiNext Index declined 1.11%,
• While the STAR 50 Index rose 1.4%.

In Hong Kong:

• The Hang Seng Index closed down 1.52%,
• The H-share Index fell 1.45%,
• The Hang Seng Tech Index dropped 1.82%.

Trump Signals De-escalation on Tariffs

On October 12, Trump softened his tone in a post on his social media platform “Truth Social,” urging calm:“Don’t worry about China... Xi is just in a bad mood... He doesn’t want his country in depression, and I don’t want America that way either. America wants to help China, not hurt it.”

Over the weekend, Vice President JD Vance added: “Trump is willing to engage in rational negotiations with China.”

Vance revealed he had spoken with Trump on both Saturday and Sunday, noting that the president “values the friendship he has built with Chinese leaders.” He added: “We have many cards to play. But my hope — and I know the president’s hope — is that we won’t need to use them.”

China Holds Back on Retaliation

China’s Foreign Ministry stated that if the U.S. persists with new tariffs, China will take countermeasures as appropriate — but so far, Beijing has maintained restraint and taken no immediate action. It reiterated a call for Washington to correct its course and resolve differences through dialogue, in line with the consensus reached during recent phone talks between the two heads of state.

Back in April, sustained U.S. tariff pressure triggered swift retaliatory measures from China, leading to a “lose-lose” trade war that created negative feedback in financial markets. This time, however, the impact of proposed tariffs appears to be diminishing at the margin, and investors are now more prepared for what some call the “TACO” (Tariff Announcement, then Correction, then Optimism) trade pattern.

Analysts See Buying Opportunity

Amundi Wealth Management said the strong rally earlier this year had created technical overbought conditions, making the current pullback a “healthy correction” — an ideal chance for underweight investors to increase exposure to Chinese assets.

Jefferies analysts Edison Lee and Nick Cheng noted that despite short-term pressure, leading Chinese players in AI and semiconductors are approaching more attractive entry points. They highlighted China’s stronger resilience and Trump’s tendency toward deal-making, suggesting this downturn could become a strategic mid-term buying opportunity.

Gary Dugan, CEO of Global CIO Office, said the selloff was mainly driven by profit-taking amid geopolitical tensions, with fundamentals unchanged. He views the dip as a chance to add positions in Asian and tech equities, though patience is key.

Overall, while U.S.-China trade tensions have flared up again, most market participants believe the impact is manageable. Short-term volatility is increasingly seen not as a risk — but as a window for long-term portfolio positioning.