China stocks set for biggest weekly loss in 5 months as Sino-US tensions flare up

SHANGHAI: China's benchmark share index is poised to post its biggest weekly loss in five months, as a flare-up in Sino-US tensions and worries about policy tightening dented risk appetite.

Hong Kong stocks tracked Asian markets higher as progress in COVID-19 vaccines boosted investor sentiment.

The blue-chip CSI300 Index dropped 1.3% to 4,875.26 points, on track to fall more than 3.7% for the week - the biggest weekly decline since July. The Shanghai stock market fell 1%.

In Hong Kong, the Hang Seng index added 0.3% to 26,485.23 points, while the Hong Kong China Enterprises Index gained 0.1% to 10,421.90.

S&P Dow Jones Indices on Thursday became the second major index provider to remove some Chinese companies from its index products following a Trump administration executive order, in the latest market disruption from persistent Sino-US tensions.

FTSE Russell made a similar move last week, while rival index publisher MSCI is expected to follow suit.

Shares of the 10 US-blacklisted companies, including Hangzhou Hikvision Digital Technology Co Ltd, Semiconductor Manufacturing International Corp (SMIC) and China Communications Construction Co all fell moderately on Friday.

In another sign of rising tensions, the US Federal Communications Commission (FCC) said on Thursday it begun the process of revoking China Telecom's authorization to operate in the United States.

Investors are also concerned that Beijing could start tightening monetary policies amid a robust economic recovery and surging commodity prices, though analysts do not see any major policy reversals any time soon.

"A-share sentiment will likely stay range-bound for the rest of year amid rising signals of potential policy tightening and US-China tension uncertainty," Morgan Stanley wrote on Friday.

Chinese stocks fell across the board. Shares of Chinese retailer Suning.com Co slumped over 5% on Friday morning amid lingering concerns over its financial health.