Hong Kong, Mainland Markets Hammered

Hong Kong and mainland markets plunged on Tuesday on fears that the US and China could be heading for a full-blown trade war following tit-for-tat tariff threats.

The Hang Seng Index ended 2.8 percent down, to close at 29,468, having pared earlier sharp losses.

The sell-off followed a threat by Donald Trump that he would impose 10 percent tariffs on hundreds of billions of dollars worth of Chinese imports, a move Beijing labelled "blackmail" and warned it would respond to in kind.

The news sent equities plummeting across Asia, led by mainland Chinese markets.

The benchmark Shanghai Composite Index, which ended down 3.8 percent, at 2,907, while the Shenzhen Composite Index tumbled 5.8 percent, to 1,594.

It is the first time the Shanghai index has dipped below 3,000 since September 2016, according to Bloomberg.

Qian Qimin, an analyst of Shenwan Hongyuan Group, said the number was a psychological threshold for investors.

"Now the defence line has been broken, people are panicking and we are seeing some irrational behaviour," Qian said.

"The market is really weak right now and there is still uncertainty."

Zhang Gang, a Shanghai-based strategist with Central China Securities Co, told Bloomberg News: "Investors are worried the US may impose further restrictions on Chinese tech and internet products and cause greater uncertainty for the domestic economy.

"The Shanghai Composite is unlikely to bottom out any time soon."

Trading floors across Asia were a sea of red. Tokyo was 1.8 percent lower while Seoul sank 1.5 percent, Singapore slipped 0.1 percent and Taipei fell 1.7 percent while Manila lost 1.7 percent.

Bangkok and Wellington were also sharply lower. Sydney was marginally down. (AFP)