China and Hong Kong stocks were subdued on Tuesday, as Sino-U.S. tensions curbed risk appetite and investors looked for more evidence that the Chinese economic recovery is gaining traction.

** China's blue-chip CSI300 Index was little changed by the end of the day, and the Shanghai Composite Index rose 0.3%. Hong Kong's benchmark Hang Seng dropped 0.2%.

** Friction between China and the United States kept investors cautious as Washington and Beijing traded accusations about high-altitude balloons, souring market sentiment.

** Meanwhile, bets on China's recovery cooled as investors awaited further evidence that the economy is back on its feet after Beijing scrapped its strict zero-COVID policy in December.

** "The market is still battling between expectations of a strong recovery, and the reality of mild growth," Capital Securities wrote in a report.

** "The policy remains generally loose, but there have not been stronger-than-expected measures announced or implemented."

** China Asset Management Co expects volatility in the short term, saying the stock market rebound driven by recovery bets is coming to an end.

** However, the mutual fund house remains sanguine over the course of the year, recommending sectors including real estate, chemicals, construction materials, computer and chip design.

** Most sectors traded sideways on Tuesday, with non-ferrous metal rising 0.8%, while liquor slid 0.7%.

** Meanwhile, Bloomberg News reported that U.S. Secretary of State Antony Blinken is considering a meeting with China's top diplomat Wang Yi at the Munich Security Conference.

** Investors are also eyeing U.S. inflation data due later in the day.

** Some Hong Kong-listed units of Chinese brokerages, including Haitong International and GF Securities continue to decline, after reports China bans Hong Kong securities firms from soliciting mainland Chinese clients.

** The Hang Seng Tech Index and healthcare stocks fell 1% and 1.5%, respectively. (Reporting by Shanghai Newsroom; Editing by Uttaresh.V and Jacqueline Wong)