China shares derail as U.S. move against HK dents sentiment

China and Hong Kong shares fell on Wednesday on deepening worries about Sino-U.S. decoupling after President Trump signed a bill that would penalize banks doing business with Chinese officials who implement the new security law.

China and Hong Kong shares fell on Wednesday on deepening worries about Sino-U.S. decoupling after President Trump signed a bill that would penalize banks doing business with Chinese officials who implement the new security law.

** At the midday break, the Shanghai Composite index was down 1.39% at 3,367.21 points, erasing earlier gains.

** China's blue-chip CSI300 index was down 1.04%, with its financial sector sub-index dropping 1.79%, the consumer staples sector up 0.55%, the real estate index down 2.15% and the healthcare sub-index up 2.1%.

** Chinese H-shares listed in Hong Kong fell 0.69% to 10,333.46, while the Hang Seng Index was down 0.55% at 25,337.34, after opening higher at 1.6%.

** U.S. President Donald Trump on Tuesday ordered an end to Hong Kong's special status under U.S. law to punish China for what he called "oppressive actions" against the former British colony and signed a bill approved by the U.S. Congress to penalize banks doing business with Chinese officials who implement the new security law.

** China said on Wednesday it will impose retaliatory sanctions on U.S. individuals and entities after Trump's move.

** The sanction threats over Hong Kong would dent short-term sentiment and cast shadow on funding flows of the city, said Zhang Qi, an analyst with Haitong Securities, adding that the latest bill reinforced the idea that frictions between China and the U.S. have become normalized.

** The smaller Shenzhen index was down 1.77% and the start-up board ChiNext Composite index was weaker by 1.34%.

** Around the region, MSCI's Asia ex-Japan stock index firmed up by 0.29%, while Japan's Nikkei index advanced 1.28%.

** The yuan was quoted at 7.0024 per U.S. dollar, 0.07% firmer than the previous close of 7.0075.