The S&P/ASX 200 index ended 0.96pc lower at 5,497. For the week, it gained 1.7pc.
The United States warned China against imposing a new national security law on Hong Kong, saying any dilution of the city's autonomy could lead to a withdrawal of the favourable US trading terms that have helped Hong Kong maintain its position as a global financial centre.
Souring relations between Beijing and Washington has also made investors nervous about the Phase 1 trade deal signed earlier this year.
The Australian benchmark though closed higher for a fourth straight week.
Recent gains by the Aussie benchmark can seem odd given underlying economic factors remain dire, while the increased liquidity in markets has clearly spilled over into assets like stocks, said Michael McCarthy, chief market strategist at CMC Markets.
Among sectors and stocks, the sub-index for miners fell 0.8pc but gained more than 6pc for the week, its best weekly performance in over three years, as iron ore prices gained.
Global miners Rio Tinto and BHP Group ended 2pc and 0.6pc lower, respectively.
Financial stocks declined, with the "big four" banks falling in the range of 0.6pc and 1.2pc. Its sub-index fell for the second consecutive week.
Australia has made the deepest dividend cuts globally this year, turning foreign investors wary of the country's normally high-yielding firms.
Healthcare stocks fell to a more than three-week low, with heavyweight CSL Ltd dropping 2.4pc.
Energy stocks dropped over 2pc following a drop in oil prices.
New Zealand's benchmark S&P/NZX 50 index fell to end the week 0.6pc lower. Fisher & Paykel Healthcare Corp closed 2.7pc lower.