China stocks touch 2-month lows as lending disappoints, trade risks linger

Shares in China dipped to two-month lows on Tuesday after bank lending growth undershot analysts' estimates, and as investors awaited cues from U.S. President Donald Trump on trade. At midday break, the Shanghai Composite index was down 0.4% at 2,897.23 points, having fallen mid-trade to its lowest level since Sept. 2.

CSI300 index fell almost 0.5%. Both CSI300 and the Shanghai benchmark are heading for their third consecutive session of losses. CSI300's financial sector sub-index, the consumer staples sector and the real estate index all fell around 0.1%, and the healthcare sub-index was down 0.3%. The smaller Shenzhen index fell 0.8% and the start-up board ChiNext Composite index was weaker by 0.9%.

New bank loans in China fell more than expected to their lowest in 22 months in October, though seasonal factors likely contributed to the steep drop and policymakers are still expected to ramp up support. Chinese regulators have been trying to boost bank lending and lower financing costs for over a year, but domestic demand remains sluggish as investment and consumption weakens, while escalating U.S.-China trade tensions weigh on exports.

The mood in Asian markets stayed cautious in morning trade ahead of a speech by President Trump to the Economic Club of New York later in the day, in case there was any new word on the Sino-U.S. Phase one trade deal. Trump shook markets by denying reports of Washington rolling back tariffs on Chinese goods over the weekend. "Despite all the recent noise the market fundamentals remain relatively stable that should give equities some support," Gerry Alfanso, analyst at brokerage Shenwan Hongyuan, wrote in a note on Tuesday.

In Hong Kong, Chinese H-shares edged up 0.3%, while the Hang Seng Index rose less than 0.1% to 26,947.66. The market dropped to the lowest since the start of November on Monday after a protester was shot by police and a man set on fire. The city remained on edge on Tuesday with rush-hour transport disrupted. At midday, China's A-shares were trading at a premium of 28.28% over the Hong Kong-listed H-shares. The Shanghai stock index is below its 50-day moving average and 200-day moving average.