China, Hong Kong stocks set for worst month in over two years on Middle East unrest

China and Hong Kong stocks extended losses on Tuesday and were on track for their worst monthly loss since the beginning of 2024, as positive manufacturing data failed to offset investor caution over the Middle East conflict.

China's blue-chip CSI300 Index .CSI300 was down 0.58% by the lunch break, while the Shanghai Composite Index .SSEC fell 0.38%.

Hong Kong's benchmark Hang Seng Index .HSI lost 0.51%.

For the month, the Shanghai Composite is down more than 6% and the Hang Seng fell over 7%, both heading for their biggest monthly decline since January 2024.

China released better-than-expected March manufacturing data, with official manufacturing purchasing managers' index (PMI) rising to 50.4, above the 50-threshold and hitting the highest point in 12 months.

A delayed Lunar New Year this year contributed to a stronger March PMI, Zhiwei Zhang, chief economist at Pinpoint Asset Management said, adding that an outlook for the second quarter remains unclear for now.

"The market is increasingly worried about the risk of global growth slowdown and supply chain disruption," he said, adding a global growth slowdown would dampen China's exports.

Oil prices weakened in Asian trading on Tuesday following a media report that U.S. President Donald Trump told aides he is willing to end the Iran war without reopening the Strait of Hormuz.

New energy .CSI399808 and semiconductor stocks .CSI931865 led the decline in mainland shares, down almost 3% each.

In Hong Kong, the Hang Seng Tech .HSTECH lost another 0.9% by midday, following a 1.8% slump in the previous session.

The smaller Shenzhen index .SZSC was down 1.27%, the start-up board ChiNext Composite index .CNT was weaker by 2.36% and Shanghai's tech-focused STAR50 index .STAR50 was down 1.68%​.

Around the region, MSCI's Asia ex-Japan stock index .MIAPJ0000PUS was weaker by 1.38% while Japan's Nikkei index .N225 slipped 1.27%.

-Reporting by Summer Zhen; Editing by Sherry Jacob-Phillips/Reuters