SHANGHAI: Mainland China shares extended losses on Wednesday after falling sharply in the previous session, as cautious investors monitored developments around Sino-US tensions following House Speaker Nancy Pelosi’s visit to Taiwan.

China condemned the highest-level US visit to Taiwan in 25 years as a threat to peace and stability in the Taiwan Strait, responding with a flurry of military exercises, summoning the US ambassador in Beijing, and announcing the suspension of several agricultural imports from Taiwan.

At the market close, the Shanghai Composite index was down 0.7% at 3,163.67 points, its lowest close since May 30, and blue-chip CSI300 index lost 1% to 4,066.98.

In Hong Kong, the benchmark Hang Seng Index edged up 0.4% at 19,767.09 at the close, while Chinese H-shares listed in Hong Kong climbed 0.52%.

Defence stocks surged, with an index tracking the sector jumping 4.3%, as China’s military announced joint air and sea drills near Taiwan and test launches of conventional missiles in the sea east of Taiwan. Chinese state news agency Xinhua described live-fire drills and other exercises around Taiwan from Thursday to Sunday.

“The immediate focus for markets shifts to, first, the risk of escalation once the US House Speaker leaves the region and, second, whether there should be a medium-term repricing of risk in Taiwan-sensitive assets, including TWD and equities and likely some contagion effect across Asia market,” said Stephen Innes, managing partner at SPI Asset Management.

Meanwhile, Hong Kong stocks recovered in morning trade to track gains in Chinese shares listed on Wall Street, led by rises in tech shares. An index tracking major tech firms listed in the financial hub rose 1.24%.