*

Hong Kong's Hang Seng dives 9% as trade war fans recession

fears

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China's CSI300 falls over 5%, yuan hits lowest since

January

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UBS economist warns of significant economic impact

(Updates prices)

SHANGHAI, April 7 (Reuters) - Hong Kong and Chinese

stocks dived on Monday after Beijing fired back at U.S. tariffs

with its own trade levies, sowing more turmoil in financial

markets as investors feared a widening trade war would unleash a

deep recession.

Hong Kong's Hang Seng index slumped about 9% with

tech, solar, banking and online retailers' shares plunging as

investors swiftly pulled out of anything linked to global growth

and trade.

Hong Kong-listed shares of HSBC tumbled 13% to

head for their largest daily fall since 2009 and Standard

Chartered stock was down more than 16%, on course for

a record fall.

China's CSI300 blue-chip index fell more than 5%

with selling engulfing nearly every sector. China's yuan

slipped to its lowest since January and bonds rallied

sharply.

China, which is now facing U.S. tariffs of over 50%,

responded in kind on Friday by slapping extra levies on U.S.

imports.

The intensifying spat between the world's two biggest

economies threatens to upend trade flows, and besides hitting

Chinese earnings, it is also expected to drive a slowdown in

global demand at a time of stuttering growth in China.

"I think the impact of this shock is going to be quite

significant," said UBS chief China economist Tao Wang on a call

with investors on Monday. "It was challenging to achieve the

government's growth to start with. And now it's even more

challenging."

Trading volumes were heavy, particularly as Chinese markets

had been shut on Friday when selling was heaviest in the U.S.

and other financial centres.

"The Asia move this morning is partly a catch-up from Friday

for markets ... so I wouldn't say there's been a

disproportionate move today - it's a blanket risk off," said Ben

Bennett, head of investment strategy for Asia at LGIM in Hong

Kong.

Mainland indexes of solar companies and

household appliance makers notched losses around

10%. Selling was almost as strong in oil and gas shares, as the

prospect of a global recession hammered oil prices, and sectors

from electric vehicles to cloud computing.

The Hang Seng volatility index shot to its highest

since October.

In the absence of any hint of a backdown from the White

House, the focus for investors will be on Beijing to come up

with measures to support Chinese exporters and shore up the

domestic economy.

Shares in online giants Alibaba ( BABA ) and Tencent ( TCTZF )

were down more than 10%.