SHANGHAI: China stocks hit a near two-and-half-year low in early trading on Thursday as the yuan's recent fall dampened investor confidence, but news of Sino-US trade talks later this month helped recoup some of the losses.
China said a delegation would attend the next round of trade talks with US counterparts in Washington later this month, in the latest bid to defuse a conflict that has set world markets on edge.
The blue-chip CSI300 index fell 0.4 per cent to 3,276.73 points, while the Shanghai Composite Index ended down 0.7 per cent at 2,705.19 points.
Both indexes posted their fourth straight session of declines.
China's yuan weakened to a 15-month low against the dollar on Wednesday and flirted with a key support level not seen since 2008 as the dollar extended gains and a raft of data pointed to further slowing in China's economy.
The yuan firmed 0.5 per cent against the dollar on Thursday on signs of possible easing in tensions between Beijing and Washington as they agreed to hold trade talks late this month.
"The normal rise and fall in yuan will have limited impact on the stock market, though investor sentiment could be hard hit when key psychological levels are breached, such as the 6.9 per dollar," said Yan Kaiwen, an analyst with China Fortune Securities.
The declines also follow downbeat economic data reported on Tuesday, which come as a trade war with the United States threatens to pile more pressure on the world's second-largest economy.
Around the region, MSCI's Asia ex-Japan stock index was weaker by 0.33 per cent, while Japan's Nikkei index closed down 0.05 per cent.
At 06:59 GMT, the yuan was quoted at 6.901 per US dollar, 0.48 per cent firmer than the previous close of 6.934.
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