China's blue-chip index falls to 3-month low as investors dump tech stocks

SHANGHAI, May 23 (Reuters) - China’s blue-chip stock index dropped to a three-month closing low on Thursday, as investors dumped technology shares amid worries a growing number of Chinese firms in the hi-tech sector could bear the brunt of an escalating trade war with the United States.

** The blue-chip CSI300 index fell 1.8%, to 3,583.96, the lowest closing level since February 22. The Shanghai Composite Index lost 1.4% to 2,852.52.

** Technology shares led the decline, with an index tracking the sector down 3.5%. ** Late Wednesday, Reuters reported the U.S. administration was considering Huawei-like sanctions on Chinese video surveillance firm Hikvision over the country’s treatment of its Uighur Muslim minority.

** Hikvision shares extended steep losses, slumping 5.8%. Another security equipment manufacturer Zhejiang Dahua Technology Co Ltd tumbled 4.6%.

** Shares of Huawei suppliers continued to tank. After the United States placed Huawei Technologies on a trade blacklist last week, British chip designer ARM has halted relations with Huawei in order to comply with the blockade.

** Suppliers including Luxshare Precision Industry, Shenzhen Sunway Communication Co Ltd, Shennan Circuits and Shenzhen Goodix Technology Co. Ltd. all fell sharply. ** Bucking the broad selloff, shares of China’s semiconductor firms jump on Thursday, as Beijing rolls out supportive measures to bolster the development of the key industry.

** Beijing’s preferential tax treatment to China’s chip design and software industry bolstered shares in Hunan Goke Microelectronics, Ningbo Kangqiang Electronics Co Ltd and Shenzhen Fine Made Electronics Group Co Ltd . ** China-listed rare earth firms, including Innuovo Technology Co Ltd and JL MAG Rare-Earth Co Ltd continued to rise sharply, amid speculation the sector could be the next front in the trade war.

** Rising tensions between the United States and China have sparked concerns that Beijing could use its dominant position as a supplier of rare earths for leverage in the trade war between the two global economic powers.

** “Outside of the direct US-China technology conflict, China holds a ‘nuclear option’ against the US as it controls 85% of the global rare earths industry,” Saxo Bank’s head of equity strategy Peter Garnry wrote. “China could cause severe disruptions to the US economy and military by restricting access to rare earth minerals.”

Reporting by Shanghai Newsroom; Editing by Shreejay Sinha