HONG KONG: China shares wobbled, and Hong Kong stocks extended declines on Wednesday, tracking a broader Asian sell-off, while investors remained cautious due to the uncertainty about the economic recovery.

The blue-chip CSI 300 Index slid 0.2%, while the Shanghai Composite Index edged up 0.2%.

Hong Kong’s Hang Seng Index dropped 0.9% and the Hang Seng China Enterprises Index fell 0.8%.

“The sluggishness in economic recovery and policy uncertainty is keeping investors cautious,” said Redmond Wong, Greater China market strategist at Saxo Markets.

The correction overnight in the U.S. also weighed on regional markets, he added.

Broader Asian shares extended a global sell-off, as market optimism about early and aggressive U.S. interest rate cuts waned ahead of the release of the Federal Reserve’s last monetary policy meeting minutes and jobs data.

China, HK stocks end 2023 as world’s worst performers

Some of China’s top banks have sharpened scrutiny of smaller peers’ asset quality and tightened standards for interbank lending, in an effort to curb credit risk as a deepening property debt crisis ripples through the economy, Reuters reported on Wednesday.

Putting together December Caixin and official PMI reflect further softness in domestic demand conditions and slowing service sector, with manufacturers focussing on export market competition, J.P. Morgan analysts said in a note.

Artificial intelligence-related stocks dropped 2.8% and information technology companies fell 2.2% to lead the decline.

Chinese gaming stocks rose 1%, outperforming a weak broader market, following Reuters’ report on the removal of a gaming regulatory official in China, seen as a step to calm the market.

But Saxo Markets’ Wong said this move, coupled with the People’s Bank of China’s injection of funds, is insufficient to impact the big picture.

“The Hong Kong and mainland A-share markets are still in the process of finding a bottom,” he said.

Hong Kong-listed tech giants dropped 1.8%.