HONG KONG – The government of the Hong Kong Special Administrative Region has pledged it will strictly guard against financial risk to ensure the stability of the Hong Kong financial market.

Financial Secretary Paul Chan Mo-po made the remarks after Monday’s local stock market rout that saw the benchmark Hang Seng Index plunge 13.2 percent. The sell-off followed the United States’ imposition of global tariffs last week, sparking uncertainty in the macroeconomic environment.

“Even with the pessimistic global investment sentiment, the Hong Kong dollar is still very strong, the Hong Kong financial system is still very stable, transactions are smooth and orderly, and no abnormal behavior has been found that would have a systemic impact on the Hong Kong market,” Chan said in a Monday news conference after the stock market closed.

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The special administrative region government will continue to work with the Securities and Futures Commission, the Hong Kong Monetary Authority and the Hong Kong Stock Exchange to closely monitor market conditions around the clock, in a coordinated and cross-market manner, and remain highly vigilant and strictly guard against financial risks, he said.

“The US tariff measures will inevitably increase market volatility in the coming period, and the countermeasures of various countries and the interest-rate policy directions of major central banks in various countries will trigger more volatile capital flows,” he said.

Securities and Futures Commission CEO Julia Leung Fung-yee said, “Amid the sharp drop in the local stock market, the bid-ask spread is very narrow, which means the overall market operation is very normal, resilient and able to withstand risks.”

The Hang Seng Index tumbled 3,021 points on Monday, its largest-ever single-day point drop, to close at 19,828 points, with a record market turnover of close to HK$620.9 billion ($79.92 billion).

In terms of percentage drop, the HSI plummeted 13.2 percent, the largest percentage drop since October 2008.

Blue-chip stocks fell across the board, with heavy selling pressure on pharmaceutical, consumer electronics and mobile device stocks, while utility shares can register a smaller decline.

The Hang Seng China Enterprise Index, the barometer of mainland-based company performance, dived 13.8 percent to finish at 7,262 points, while the Hang Seng Tech Index, the city’s technology stock gauge, plunged 17.2 percent to close at 4,401 points.

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Financial analysts expect the local equity market will be supported by more expansionary policies, and the continued earnings re-rating of mainland H-shares and Hong Kong-based companies.

Victor Tse, head of Equities at Heng Seng Investment Management, said that as the US is now at a 30 percent chance of entering an economic recession, the US Federal Reserve may cut interest rates twice, by 50 basis points, in the second half of this year.

Tse said the valuation of Hong Kong equity market is still cheap, as the HSI’s average price-to-earnings ratio is still hovering around a multiple of 10.2, and the Hang Seng Tech Index still has a 27.2 percent discount compared to the Nasdaq 100 Index.

Ivan Chu Siu-lun, chief adviser at the Hong Kong Sustainable Development Research Institute, said: “After outperforming the growth of global market in the first quarter of 2025, even if Hong Kong’s stock market is affected by external fluctuations, these factors will not affect the overall upward trend of the local stock market. After all, a large number of investors are looking for opportunities in Asia, and US-related investment funds are looking for opportunities in Hong Kong as well.”

Tom Chan, permanent honorable president and director of the Institute of Securities Dealers, advised investors to be very careful in making their investment decisions amid the current chaotic market situation as there a lot of uncertainties.

The HSI gained 15.2 percent in the first quarter of this year, buoyed by the economic stabilization of Hong Kong and the Chinese mainland, and the gradual market re-rating of Hong Kong-listed shares, particularly the technology stocks.