China stocks fall as trade uncertainties rattle nerves

• The US-China trade war has hardened into a political and ideological battle that runs far deeper than tariffs and could take years to resolve.
• Investors' appetite for risk assets was curbed after Chinese officials unexpectedly cancelled a visit to farms in Montana and Nebraska.

HONG KONG: China stocks started the week on a soft note on Monday, as uncertainties around Sino-US trade talks dampened risk appetite.

The blue-chip CSI300 index fell 1.1pc, to 3,890.66, while the Shanghai Composite Index lost 1.1pc to 2,977.08.

Washington and Beijing labelled the two-day talks last week as "productive" and "constructive", with the US Trade Representative's office saying that high-level negotiations will take place in October, as previously planned.

However, investors' appetite for risk assets was curbed after Chinese officials unexpectedly cancelled a visit to farms in Montana and Nebraska.

Trade experts, executives and government officials in both countries said even if the September and October talks produce an interim deal, the US-China trade war has hardened into a political and ideological battle that runs far deeper than tariffs and could take years to resolve.

Lack of progress in Sino-US trade talks prompted investors to sell shares for the short-term, after a strong rally in the benchmark Shanghai index since early August, Zhang Qi, an analyst with Haitong Securities, said.

Most China analysts noted further deterioration in Sino-US trade relations would be a key downside risk for the A-share market.

Major international index providers on Monday progressed the inclusion of the A-share market into their indexes amid Beijing's pledge to further open up its financial markets, with foreign investors pouring money into stocks in the previous session ahead of the move.

FTSE Russell completed its second tranche of A Share inclusion on Monday, while S&P Dow Jones Indices also added eligible China A-shares accessible via the Stock Connect linking Hong Kong and the mainland.

"We received positive feedback from index users on our initial tranche of over 1,000 small-, mid- and large-cap China A Shares in June, with many asset managers adjusting their portfolios as part of the inclusion process," said Jessie Pak, Asia Managing Director of FTSE Russell.

Around the region, MSCI's Asia ex-Japan stock index  was weaker by 0.14pc.

At 07:14 GMT, the yuan was quoted at 7.1131 per US dollar, 0.3pc weaker than the previous close of 7.0915.

About 16.81 billion shares were traded on the Shanghai exchange, roughly 89.0pc of the market's 30-day moving average of 18.90 billion shares a day.

The volume in the previous trading session was 18.21 billion.

As of 07:15 GMT, China's A-shares were trading at a  premium of 29.53pc over the Hong Kong-listed H-shares.