SHANGHAI (Reuters) - China stocks tumbled on Thursday as investors were spooked by a U.S. proble of Huawei, triggering a sell-off in tech firms as trade tensions between Beijing and Washington simmered just below the surface.
The blue-chip CSI300 index closed down 1.9 percent at 3,755.49 points, its worst day in a month, while the Shanghai Composite Index lost 1.4 percent to 3,075.03 points.
U.S. prosecutors in New York have been investigating whether Chinese technology company Huawei violated U.S. sanctions in relation to Iran, according to sources familiar with the situation.
Since at least 2016, U.S. authorities have been probing Huawei's alleged shipping of U.S.-origin products to Iran and other countries in violation of U.S. export and sanctions laws, two of the sources said.
An index tracking IT and telecoms firms closed down 2.8 percent and 2.5 percent respectively, as the Huawei probe added to investor worries over a U.S. government decision last week to bar ZTE from buying American technology.
The northbound leg of the Shenzhen-Hong Kong stock connect saw an outflow of 3.2 billion yuan ($506.40 million), a record since the leg's launch in December 2016. Most of China's tech firms are listed on the Shenzhen Stock Exchange.
The slump in leading home appliances maker Gree Electric also weighed on the market, after the firm announced no annual cash dividend payment for the first time since 2007.
Gree Electric tumbled 9 percent in its worst day since late 2016, shaking investor confidence in other blue-chips which enjoyed solid results.
"Investors shall be cautious for the moment, as we do not see any major sustainable investment themes," said Chen Xiaopeng, an analyst with Sealand Securities.
However, Chen expected little chance of a sharp downturn for China's major stock indexes, adding policymakers could roll out more supportive polices to hedge external uncertainties, including trade war tensions with the United States.
China will further reduce taxes to support small firms and high-tech companies, state radio quoted the cabinet as saying on Wednesday, with seven measures expected to result in cuts of more than 60 billion yuan.
($1 = 6.3191 Chinese yuan renminbi)
(Reporting by Shanghai Newsroom; Editing by Shri Navaratnam)