Asia report: Shares pull back from early gains on China sanctions report

Asian shares fell back from strong gains at the close on Monday after a report the US was getting ready to hit more Chinese officials with sanctions.

Hong Kong’s Hang Seng dropped 1.25%, while the Shanghai Composite index fell 0.8% and the Shenzhen Composite closed 0.3% lower. Japan’s Nikkei 225 lost 0.76%. South Korea’s Kospi inched up 0.5% and the Australian S&P/ASX 200 added 0.6%, while stocks inched up 0.17% in Singapore.

The sell-off began after a Reuters report the US was preparing sanctions on at least a dozen Chinese officials over their alleged role in Beijing’s disqualification of elected opposition legislators in Hong Kong.

Visa restrictions on Chinese Communist Party members and their families were tightened late last week as the outgoing Trump administration appeared to be ratcheting up tension between Washington and Beijing before Joe Biden takes over as US President next month.

Markets had been bullish at the opening as China trade numbers for November showed imports up by 4.5%, slightly less than expected but the third monthly increase in a row. Exports rose by 21%, up from October’s 11.4% rise, driven by sales of PPE and other medical equipment.