Chinese stocks extend losses as cautious investors monitor China-US relations

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SHANGHAI — Mainland China stocks extended losses on Wednesday after falling sharply in the previous session, as cautious investors watched developments in Sino-U.S. tensions after House Speaker Nancy Pelosi’s visit to Taiwan .

**China has condemned the highest-level US visit to Taiwan in 25 years as a threat to peace and stability in the Taiwan Strait, responding with a wave of military exercises, summoning the US ambassador to Beijing and announcing the suspension of several agricultural imports from Taiwan.

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**At market close, the Shanghai Composite Index was down 0.7% at 3,163.67 points, its lowest since May 30, and the blue chip CSI300 index was down 1% at 4 066.98.

** In Hong Kong, the benchmark Hang Seng Index edged up 0.4% to 19,767.09 at the close, while Hong Kong-listed China H-shares climbed 0.52%.

** Defense stocks jumped, with an index tracking the sector jumping 4.3%, as the Chinese military announced joint air and sea exercises near Taiwan and test launches of conventional missiles in the sea east of Taiwan. China’s state-run Xinhua news agency described live-fire and other drills around Taiwan from Thursday to Sunday.

** « Immediate market attention shifts to, first, the risk of escalation once the US House Speaker leaves the region and, second, whether there should be a medium-term revaluation risk in sensitive assets in Taiwan, including TWD and equities and likely a contagion effect in the Asian market,” said Stephen Innes, managing partner at SPI Asset Management.

**Meanwhile, Hong Kong shares rallied in morning trade to follow gains in Wall Street-listed Chinese stocks, driven by higher tech stocks. An index that tracks major tech companies listed in the financial hub rose 1.24%. (Reporting by Shanghai Newsroom; Editing by Uttaresh.V and Rashmi Aich)