April 18, 2018 / 4:51 AM / 7 months ago

China stocks extend losses as trade fallout spreads, offsets RRR cut; Hong Kong up

* SSEC -0.4 pct, CSI300 -0.7 pct, HSI 0.3 pct

* HK->Shanghai Connect daily quota used 20.5 pct, Shanghai->HK daily quota used -6.9 pct

* FTSE China A50 -0.4 pct, BNY Mellon ADR China Select Index +1.4 pct

SHANGHAI, April 18 (Reuters) - China stocks gave up early gains and fell for a fifth straight session on Wednesday as fallout from trade disputes with the United States spread to more sectors, offsetting gains in banking shares after a surprise cut in reserve requirements.

The CSI300 index fell 0.7 percent to 3,722.81 points by the end of the morning session, while the Shanghai Composite Index lost 0.4 percent, to 3,055.43.

Chinese liquor makers led the decline, sliding 1.8 percent after Beijing said on Tuesday it was imposing hefty anti-dumping deposits on imports of U.S. sorghum, used in livestock feed and the fiery Chinese liquor baijiu. The move is expected to push up the firms’ input costs.

Telecom and tech shares extended losses after the United States banned American companies from selling components to Chinese telecom equipment maker ZTE Corp. An index tracking telecoms companies fell 2.2 percent by the lunchbreak.

Chinese banking shares bucked the downward trend, however, rising 0.4 percent, after the central bank said late on Tuesday it was slashing reserve requirement ratios (RRRs) for most banks by 100 basis points (bps).

The move will reduce financing costs for banks and free up more funds for lending to small firms, but falls short of broad monetary easing, with the authority attaching requirements on how funds must be used.

“The ratio cut doesn’t constitute broad monetary easing. But it does signal that — despite the recent strength of the official data — policymakers are starting to balance concerns about economic conditions alongside their longstanding desire to contain credit risks,” said Mark Williams, chief Asia economist at Capital Economics.

Banks’ profits should improve with lower funding costs, OCBC Bank wrote in a note.

The RRR cut also could buffer the impact from China-U.S. trade frictions, domestic brokerage CITIC Securities said in a report.

But cautioned prevailed as Washington and Beijing continued to slug out trade disputes in various sectors.

The U.S. Commerce Department said on Tuesday it has made a preliminary determination that common alloy aluminum sheet imports from China are being subsidized, and set countervailing duties of up to 113 percent.

Adding to pressure, heavyweight auto stocks were sold off on the mainland and Hong Kong after Beijing’s plan to open its auto market.

China will scrap a limit on foreign ownership of automotive ventures by 2022 in a major policy shift to open up the world’s biggest car market.

In Hong Kong, the benchmark Hang Seng index added 0.3 percent to 30,146.41, while the Hong Kong China Enterprises Index gained 0.3 percent to 11,938.48.

Around the region, MSCI’s Asia ex-Japan stock index was firmer by 0.3 percent while Japan’s Nikkei index was up 1.4 percent.

The yuan was quoted at 6.286 per U.S. dollar, 0.01 percent weaker than the previous close of 6.2855.

Reporting by Luoyan Liu and John Ruwitch; Editing by Kim Coghill

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