May 22, 2020 / 5:14 AM / 15 days ago

HK shares drag China market lower as new security law stokes fears

* HSI down over 4% at 6-week trough, HKD weakens to 2-week low

* Chinese blue-chips fall 1.6%, Shanghai shares down 1.3%

* Beijing pushes national security law in Hong Kong

* China abandons annual GDP growth target amid headwinds

HONG KONG, May 22 (Reuters) - Hong Kong led Chinese stocks lower on Friday after Beijing moved to impose new national security legislation on the city, stoking fears of renewed protests and tensions with Washington, and as China skipped its annual growth target.

* At midday, the Shanghai Composite index was down 1.3% at 2,830.45 points, hitting a three-week low during the session. China’s blue-chip CSI300 index was down 1.6%. ** In Hong Kong, the Hang Seng Index dropped 4.6% to 23,160.11. The index hit its lowest since April 3 in the morning session and is set for its largest daily fall since March 23. Chinese H-shares listed in Hong Kong were down 3.9%. ** The smaller Shenzhen index fell 1.5% and the start-up board ChiNext Composite index was weaker by 1.9%.

** Beijing plans to impose a national security legislation to tackle secession, subversion and terrorism activities, as well as foreign interference, according to a draft of the legislation seen by Reuters.

** The Hong Kong Dollar weakened to 7.7552 per U.S. dollar, weakest level since May 5, while interbank interest rates edged up across the curve. ** The Hang Seng property sub-index sank 6.6%, set for its largest daily percentage drop since late-2008. ** “The security law could re-focus the HK market’s attention on the social incidents and U.S.-China tensions,” said Kenny Ng, a strategist at brokerage Everbright Sun Hung Kai.

** Republican and Democratic U.S. senators said on Thursday they would introduce legislation to impose sanctions on Chinese officials for violating Hong Kong’s independence.

** But Khiem Do, head of Greater China Investments at Barings, said short-term traders were mostly concerned with the absence of a growth on Friday. “The market was hoping they would give some kind of number, 2% or 3%, but that wasn’t available.”

** China refrained from setting a 2020 GDP growth target and pledged to step up spending and financing to support its economy, the first time that China did not set a gross domestic product (GDP) goal since 1990 when the government started to publish such targets. ** Around the region, MSCI’s Asia ex-Japan stock index was weaker by 2.2%, while Japan’s Nikkei index was down 0.8%.

Reporting by Noah Sin, Editing by Sherry Jacob-Phillips

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