Hong Kong Stocks Lead Losses Among Major Asia Markets As Tensions Remain

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Stocks in Asia were lower on Friday as investors continued to watch for developments on U.S.-China trade following a recent escalation in tensions over Hong Kong.

Hong Kong's Hang Seng index led losses among major markets regionally as it fell 2.03% to close at 26,346.49, with shares of life insurer AIA dropping 2.24%.

Mainland Chinese stocks slipped on the day, with the Shanghai composite down 0.61% to around 2,871.98 and the Shenzhen composite declining 0.297% to about 1,593.10. The Shenzhen component also shed 0.42% to 9,582.16.

Elsewhere, Japan's Nikkei 225 slipped 0.49% to close at 23,293.91 while the Topix index shed 0.51% to end its trading day at 1,699.36.

South Korea's Kospi dropped 1.45% to close at 2,087.96 as shares of automaker Hyundai Motor fell 2.42%. The Bank of Korea announced on Friday its decision to keep the benchmark interest rate steady at 1.25%, in line with expectations of economists in a Reuters poll.

Meanwhile, the S&P/ASX 200 in Australia declined 0.26% to end its trading day at 6,846.00.

Overall, the MSCI Asia ex-Japan index was 1.15% lower.

Following the signing of bills by U.S. President Donald Trump in support of Hong Kong protesters on Wednesday, investors continue to assess the potential impact on ongoing trade negotiations between Washington and Beijing. China strongly condemned the actions of the U.S., with the country's Ministry of Foreign Affairs saying Thursday that Washington had "sinister intentions."

Hong Kong has been rocked by months of civil unrest initially sparked by a since-withdrawn extradition bill.

That comes as an anticipated "phase one" trade deal between the U.S. and China remains elusive ahead of Dec. 15, when additional tariffs on Chinese exports to the U.S. are set to go into effect.

"We're still concerned (about) what is the impact of this Hong Kong bill ... on the trade front," Suan Teck Kin, head of research at United Overseas Bank, told CNBC's "Squawk Box" on Friday.

"For Chinese investors and Hong Kong people, we are very cautious," Jackson Wong, asset management director at Amber Hill Capital, told CNBC's "Street Signs" on Friday. "We are waiting ... to see whether both countries ... will do any further actions."

The Japanese yen, often seen as a safe-haven currency in times of market uncertainty, changed hands at 109.49 against the dollar after seeing an earlier low of 109.59.

"A larger decline in USD/JPY is a material risk once we get a formal reaction by the Chinese authorities to the US Hong Kong Bill," Kim Mundy, a currency strategist at Commonwealth Bank of Australia, wrote in a note.

"US-China trade developments and movements in US Treasury yields will remain the key drivers of JPY direction, with Japanese economic developments a secondary driver," Mundy said.

The U.S. dollar index, which tracks the greenback against a basket of its peers, was last at 98.33 after earlier touching a low of 98.305.

The Australian dollar was at $0.6772 after seeing an earlier low of $0.6761.

Oil prices declined in the afternoon of Asian trading hours, with international benchmark Brent crude futures slipping 0.2% to $63.74 per barrel. U.S. crude futures were marginally lower at $58.09 per barrel.