(Corrects paragraph six to say China is expected to make some moves on North Korea, not South Korea)
* SSEC -0.5 pct, CSI300 -0.7 pct, HSI -0.9 pct
* Defence stocks rally amid geopolitical concerns
* Chinese traders ordered to return North Korean coal - source
SHANGHAI, April 11 (Reuters) - Stocks in Hong Kong and China fell on Tuesday morning as investors’ appetite for risky assets soured on concerns over political tensions in North Korea and the Middle East.
Energy stocks were among the biggest decliners in both markets, underpinned by losses in coal miners, after a trading source said China’s customs department ordered traders to return North Korean coal.
Hong Kong’s Hang Seng index was down 0.9 percent at the end of the morning session, at 24,054.39, while the Hong Kong China Enterprises Index lost 1.1 percent, to 10,136.96.
A tense geopolitical situation remains at the forefront of market attention, said Linus Yip, a Hong Kong-based strategist at First Shanghai Securities.
“But the general impact of Trump-Xi meeting is positive, as you can see the two countries maintain a relatively good relationship after the meeting,” Yip said.
He said China was expected to make some moves on North Korea after the meeting and that would weigh on the market in the short term. “No permanent enemies, no permanent friends.”
Coal prices had slumped more than 4 percent by the lunch break after China’s customs department issued an official order telling trading companies to return their North Korean coal cargoes.
Energy stocks were the biggest losers in a board-based decline, with an index tracking the sector shedding 1.6 percent.
Kunlun Energy Co Ltd had contracted about 4.7 percent by midday, on news that its net profit in 2016 slumped 56 percent from the previous year.
China Finance Investment Holdings Ltd plummeted around 65 percent and the reason was not immediately clear. The company reported a net loss of HK$520.7 million ($67.00 million)in 2016 on March 31.
In China, the blue-chip CSI300 index fell 0.7 percent, to 3,481.28, while the Shanghai Composite Index lost 0.5 percent, to 3,254.24.
Defence stocks had jumped 2.2 percent at midday, as investors bet on further friction between China and the United States.
Banks extended Monday’s losses and were down 0.7 percent, after China banking regulator issued risk control guidelines and fined 17 financial organisations a total of 42.9 million yuan ($6.21 million) for avoiding supervision and engaging in unapproved operations.
($1 = 7.7713 Hong Kong dollars)
($1 = 6.9035 Chinese yuan)
Reporting by Jackie Cai and John Ruwitch; Editing by Subhranshu Sahu