China stocks falter on trade risks; Shanghai shares end month lower

China stock market ended down on Wednesday after U.S. President Donald Trump issued fresh threats to China, and as developers dropped on a less supportive policy tone from Beijing. The Shanghai Composite index closed 0.7% weaker at 2,932.51 points, ending the month down 1.6%. The blue-chip CSI300 index ended down 0.9% on Wednesday, but edged up 0.3% month-on-month. CSI300's financial sector sub-index was lower by 1.3%, the consumer staples sector was down 1.1% and the healthcare sub-index dropped 0.6%. *Hong Kong's markets were suspended in the early afternoon as the city braced for a tropical storm.

Before trading halted, Chinese H-shares listed in Hong Kong were down 1.3%. The Hang Seng Index was also down 1.3% at 27,777.75, its lowest level since June 11. The smaller Shenzhen index was down 0.7% and the start-up board ChiNext Composite index was weaker by 0.6%. Trump on Tuesday warned China against waiting out his first term to finalize any trade deal, saying if he wins re-election in the November 2020 U.S. presidential contest, the outcome will be worse for China. The remarks came as top U.S. and Chinese trade officials met in Shanghai on Wednesday for talks in a bid to end a year-long trade war. China said on Wednesday afternoon the latest round of talks has concluded.

The country's foreign ministry accused the United States of flip-flopping over the past year, adding that progress can only be made if Washington shows enough sincerety. Shares in Chinese developers slid over 3% after a top decision-making body of the ruling Communist Party said on Tuesday that China will not use the property market as a form of short-term stimulus. These comments imply that the Chinese leadership "hopes to stimulate economic growth through consumption, stimulus real estate and investment is not a policy option at the moment," analysts at Chuancai Securities wrote in a note on Wednesday.

Policymakers also stressed they will step up efforts to boost demand and support the economy, and will "continue to implement the policy of tax and fee cuts." China's factory activity shrank for a third straight month in July, an official survey showed on Wednesday. The gauge stood at 49.7, a touch higher than in June, but fell short of the 50-point mark that separates expansion from contraction. Around the region, MSCI's Asia ex-Japan stock index was weaker by 0.7%, while Japan's Nikkei index dropped 0.9%. At close, China's A-shares were trading at a premium of 30.18% over the Hong Kong-listed H-shares. The Shanghai stock index is above its 50-day moving average and above the 200-day moving average.

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