China's stocks traded near their lowest since February, with the damage caused by escalating tensions with the US rout now topping $1.1 trillion.

The Shanghai Composite Index fell 0.4% at the close, after earlier losing as much as 1.5%. The gauge is now among the world's worst-performing national benchmarks this quarter, after beating every other market earlier in the year. Volume on the index was about 34% lower than the 30-day average, a sign that traders are reluctant to jump back into the market, data compiled by Bloomberg showed.

Optimism that China would soon rescue its tumbling markets is fading after stocks sank for a fourth week. Investors Monday reacted to news that some top US companies have stopped supplying critical software and components to China's Huawei Technologies Co., a sign that relations with the US aren't improving. The country's central bank warned late Friday that the escalating trade war could destabilise the global economy.

"The newsflow over the weekend, including the Huawei ban, shows that there is no sign of easing over the trade tensions," said Zhang Gang, a strategist at Central China Securities in Shanghai. "Retreating foreign investors from the A-share market and weakened expectation about the yuan are also hurting sentiment."

Stocks moving on the Huawei news included Luxshare Precision Industry Co. and Ofilm Group Co., which lost at least 6.7%. Shenzhen Goodix Technology Co. dropped by the 10% daily limit. In Hong Kong, Sunny Optical Technology Group Co. fell 5%, and Q Technology Group Co. slumped 8.3%.

Adding to the risk-off mood was news that Liu Shiyu, the former head of China's securities regulator, is under investigation for suspected law violations. That weighed on shares of banks in Jiangsu, the province where Liu's reported hometown is located. Jiangsu Zijin Rural Commercial Bank Co. slumped 4.6%, while Jiangsu Suzhou Rural Commercial Bank Co. dropped 4.2%.

Seven of the lenders based in the province listed their shares during Liu's tenure at the China Securities Regulatory Commission, which ended in January.

The Hang Seng China Enterprises Index closed 0.5% lower. The small-cap ChiNext gauge lost 0.6%, extending its slide since an April peak to 17%. Foreigners have been selling A shares at a record pace this month as the yuan weakened.