China stocks drop on worries over Trump's investment curbs

By Summer Zhen

HONG KONG, Feb 24 (Reuters) - China stocks slipped and Hong Kong shares pared early gains to trade lower by midday on Monday, weighed down by concerns over President Donald Trump's new America First Investment Policy that could escalate tensions between the two biggest economies.

China's blue-chip CSI300 Index .CSI300 and the Shanghai Composite Index .SSEC dipped 0.11% at the lunch break.

Hong Kong's Hang Seng Index .HSI fell 0.55% while the Hang Seng China Enterprises Index .HSCE lost 0.45%.

Tech stocks led the decline in Hong Kong, with the Hang Seng Tech Index .HSTECH dropping 1.4%.

On Friday, Trump signed a memorandum that directed the Committee on Foreign Investment in the U.S. to restrict Chinese investments in strategic areas, a White House official said.

The America First Investment Policy aims to restrict two-way U.S.-China investment in sensitive areas such as technology.

"Investors should not be complacent about escalating U.S.-China competition," Jefferies analysts said following Trump's move.

The emergence of DeepSeek could prompt the U.S. to be vigilant about setting back China's tech ambitions, they added.

In mainland A-shares, 5G communications .CSI931079 and healthcare sectors .CSI931079 underperformed but were partly offset by a rally in property .CSI000952 and liquor stocks .CSI399997.

George Efstathopoulos, portfolio manager at Fidelity International, said they have been witnessing some green shoots in the property sector in the past few months, indicating that "the worst of the property deleveraging cycle is behind us".

The smaller Shenzhen index .SZSC added 0.07% and Shanghai's tech-focused STAR50 index .STAR50 gained0.46%​. The start-up board ChiNext Composite index .CNT shed 0.79%.

Certainly there are some headline risks from Trump's focus on national security and resource nationalism, said Charu Chanana, chief investment strategist at Saxo Markets.

But the bigger driver for Chinese stocks will continue to be the stimulus measures expected from the annual National People's Congress meeting in March, Chanana added.