(Bloomberg) -- Chinese stocks fell on their first trading day of the year as investors braced for economic uncertainties with weaker-than-expected manufacturing data and an anticipated hike in tariffs once Donald Trump takes office.

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The CSI 300 Index, an onshore benchmark, slid as much 1.7% on Thursday, headed for a second session of losses. The Hang Seng China Enterprises Index dropped 3.1% before paring its decline.

The moves come after Chinese equities posted their first annual advance last year since 2020. Investors pointed to a range of factors behind the cautious sentiment, including the Caixin manufacturing survey that came in below estimates. A sharp fall in the CSI 300 in the last trading session of 2024 also pushed the gauge below a closely-watched technical threshold, likely leading to further selling by some funds.

Meanwhile, several large financial stocks including Industrial and Commercial Bank of China and the Agricultural Bank of China were trading ex-dividend, exacerbating the benchmarks’ losses.

“As we position our funds into the first quarter of 2025, it just seems far more likely that downside risk is far greater than upside for China,” said Xin-Yao Ng, an investment director at abrdn Plc. There are uncertainties around tariffs, soft macro numbers and a probable lull in policy stimulus until the Two-Session meetings in March, he said, referring to the country’s annual legislative session.

Chinese equities have largely been range-bound following a stimulus-driven rally in late September, with investors waiting for more significant stimulus to be released to drive the market higher. Following the Central Economic Work Conference in December, China signaled more public borrowing and spending in 2025 with a shift of policy focus to consumption, in an effort to repair the economy’s weak link as looming US tariffs threaten exports.

Trading volume was notable in Hong Kong on Thursday as markets reopened after a holiday, with that for the Hang Seng Index 60% larger than the average over the past 30 sessions. Meanwhile, turnover in Shanghai and Shenzhen bourses has remained below 1.5 trillion yuan ($206 billion) in recent days, suggesting traders are opting to remain on the sidelines until catalysts become clear.

“The declines today may be the effect of some forced selling by quant funds as onshore gauges breached the 60-day moving average” following the Dec. 31 decline, when funds adjusted year-end positions, according to Yang Tingwu, fund manager at Fujian Tongheng Investment.

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