China, HK stocks fall as escalating tensions cloud Sino-U.S. trade talks

China and Hong Kong stocks fell in early trade on Wednesday, as escalating trade and political tensions between Beijing and Washington a day ahead of high-level negotiations soured risk sentiment. China's blue-chip CSI300 Index lost 0.3% to 3,825.39 by the lunch break. The Shanghai Composite Index fell 0.1% to 2,909.53.

Hong Kong's benchmark Hang Seng Index fell 0.7% to 25,716.77. The Hang Seng China Enterprises Index lost 0.1% to 10,189.05. Asian stocks fell the most in a week as U.S. visa restrictions on Chinese officials and the addition of more Chinese companies to a U.S. trade blacklist weighed on already slim hopes that Washington and Beijing could reach a truce at trade negotiations this week.

The U.S. State Department announced the visa restrictions just a day after the U.S. Commerce Department cited the mistreatment of Uighur Muslims in China in its decision to add 20 Chinese public security bureaus and eight companies to a trade blacklist. Washington is also moving ahead with discussions about restrictions on capital flows into China, Bloomberg reported.

"Chinese equities remained in the moderately bearish territory in the morning session impacted by the deteriorating situation in the trade negotiations," wrote Gerry Alfonso, an analyst at Shenwan Hongyuan Securities. "Recent developments in the trade front, such as the blacklisting of some companies or the potential restrictions on investments, are having an impact on the equity market."

Technology, consumer and healthcare stocks were among the biggest losers in China, while developers rose on the back of strong monthly property sales figures and speculation of some localized potential policy easing. September and October are typically the top months for property sales, so there is some seasonality embedded in the data, Alfonso said.

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