(Bloomberg) -- Chinese stocks slid suddenly on Tuesday, showing that investors remain on edge as the second day of trade talks with the US gets underway.
A gauge of Chinese shares in Hong Kong fell as much as 0.9% as trading resumed after the mid-day break, and finished the session down 0.2%. It had risen as much as 0.5% earlier. The CSI 300 Index, a benchmark for onshore equities, flipped to a loss to end 0.5% lower.
It wasn’t immediately clear what caused the sudden declines. Some investors pointed to an earlier commentary listed in a social media account affiliated with state broadcaster CCTV, which said that “the US should realistically view the progress made and revoke negative measures against China.” Beijing is earnest about trade talks with the US but is at the same time principled, it added.
“The market is too sensitive,” said Fu Shifeng, investment director at Cheng Zhou Investment. “People seem to be speculating that the talks didn’t go well.”
An exchange-traded fund of Chinese internet stocks was little changed in US premarket trading. Futures on the S&P 500 and the Nasdaq 100, meanwhile, edged higher.
Hopes that trade talks will help ease Sino-American tensions and pave the way for a potential deal between the two nations have spurred a sharp rebound in Chinese shares in recent weeks. The Hang Seng China Enterprises Index entered a bull market on Monday, taking its gains from an April low to over 20%.
Global investor sentiment toward China is improving, with increased willingness to add positions in Chinese equities and greater conviction in the “new consumption” and tech spaces, Morgan Stanley analysts including Laura Wang wrote in a recent note.
Representatives from both nations were reconvening Tuesday just after 10:40 a.m. local time in London. Speaking to reporters as officials arrived, US Commerce Secretary Howard Lutnick said talks are going well and are expected to go all day Tuesday.
The first round of negotiations since delegations from the countries met a month ago is aimed at restoring confidence that both sides are living up to commitments made in Geneva. During those discussions, Washington and Beijing agreed to lower crippling tariffs for 90 days to allow time to address a trade imbalance that the Trump administration blames on an unfair playing field.
“It remains a wait-and-watch situation,” said Shen Meng, director at Beijing-based investment bank Chanson & Co. Traders may be worried about a lack of “any material progress in trade talks anytime soon,” he added.
--With assistance from Henry Ren.
(Updates to reflect latest developments in first, fifth and eighth paragraphs.)