SHANGHAI: China and Hong Kong stocks were subdued on Tuesday, as Sino-US tensions curbed risk appetite and investors looked for more evidence that the Chinese economic recovery is gaining traction.

China’s blue-chip CSI300 Index was little changed by the end of the day, and the Shanghai Composite Index rose 0.3%. Hong Kong’s benchmark Hang Seng dropped 0.2%.

Friction between China and the United States kept investors cautious as Washington and Beijing traded accusations about high-altitude balloons, souring market sentiment.

Meanwhile, bets on China’s recovery cooled as investors awaited further evidence that the economy is back on its feet after Beijing scrapped its strict zero-COVID policy in December.

“The market is still battling between expectations of a strong recovery, and the reality of mild growth,” Capital Securities wrote in a report.

“The policy remains generally loose, but there have not been stronger-than-expected measures announced or implemented.”

China Asset Management Co expects volatility in the short term, saying the stock market rebound driven by recovery bets is coming to an end.