China, Hong Kong benchmarks close lower on profit taking
The Shanghai Composite index was down 0.02% at 3,727.29, while the blue-chip CSI300 index was down 0.38%.
Hong Kong's benchmark Hang Seng index closed 0.3% lower, marking a fourth straight losing session.
Analysts said market optimism, underpinned by the extension of the US-China trade truce and expectations of a weaker dollar, increased inflows over the past few weeks.
Some investors may want to cash out at the high point after the strong rally, they said.
'The national team has a track record of selling into strength, and we believe it will continue to do the same,' Richard Tang, China strategist at Julius Baer, said in a note on Tuesday.
Yet the private bank expects 'strong return potential for the Chinese equity market into year-end', as improving liquidity in the onshore market can offset the worsening macro narrative.
In Hong Kong, with the benchmark Hang Seng rising over 25% this year, there has been 'mild profit-taking/position-squaring' in the market, said Charu Chanana, chief investment strategist at Saxo.
Some investors reduced their risk profile ahead of the Jackson Hole meeting and geopolitical risks, she said.
Investors are closely watching the Fed's Jackson Hole conference between August 21 and 23, where Chair Jerome Powell is expected to speak and could offer more clarity on the economic outlook and the central bank's policy framework.
By sector, semiconductors and brokers were among worst performers among mainland A-shares, down 1.9% and 1.8%, respectively.
Mainland property developers listed in Hong Kong rose 0.6%, after Premier Li Qiang called for forceful measures to stop losses in the sector.
The smaller Shenzhen index ended up 0.11% and the start-up board ChiNext Composite index was weaker by 0.17%.
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