HK stocks set to extend losing streak on Wall Street woes, geopolitical tensions

** Market sentiment remains subdued as the Sino-Japan diplomatic crisis deepens, adding to economic worries with no policy easing in sight. ** Hong Kong benchmark Hang Seng dropped 0.5% by the midday break, on track for a four-day losing streak.

Hong Kong stocks are heading for their fourth straight session of decline following an overnight drop on Wall Street, while China shares steadied as financial plays rebounded. ** Market sentiment remains subdued as the Sino-Japan diplomatic crisis deepens, adding to economic worries with no policy easing in sight.

** Hong Kong benchmark Hang Seng dropped 0.5% by the midday break, on track for a four-day losing streak. ** In mainland China, the blue-chip CSI300 Index climbed 0.2%, while the Shanghai Composite Index barely moved.

** Market participants lost risk appetite as U.S. stocks fell for a fourth day amid valuation worries and doubts over an interest rate cut next month. ** The mood is further soured by deteriorating relations between Beijing and Tokyo over Japanese Prime Minister Sanae Takaichi's comments on Taiwan.

** Japan has warned its citizens in China to step up safety precautions as a Tuesday meeting between Chinese and Japanese officials to de-escalate tensions offered few signs of a breakthrough. Meanwhile, the United States confirmed the sale to Taiwan of an advanced air defence missile system, in the second such weapons package for Taipei in a week. ** Escalating geopolitical tensions could add fresh pressure to China's struggling economy.

** "After six months of improving sentiment, China's growth outlook took a sharp turn in November," BofA Securities said in its latest Asia Fund Manager Survey, where 29% of respondents now expect a weaker economy. "Despite this, investors foresee limited policy easing." ** Tech shares led the decline in Hong Kong. Xiaomi plunged 4% after the company warned of further hikes in smartphone prices next year due to soaring memory chip costs. Chinese search engine Baidu lost nearly 1% after reporting a 7% fall in quarterly revenue.

** In China, strength in energy and financial shares offset losses in real estate and media plays.