By Ese Erheriene

Investor appetite for risk assets in Asia cooled on Wednesday, tracking declines in the U.S. as geopolitical concerns continued to weigh on markets.

British Prime Minister Theresa May's announcement of a general election in June, aimed at shoring up her mandate to take the U.K. out of the European Union, added to already simmering market worries around North Korea, Syria and France.

Declines in the region were led by China, as pessimism deepened on concerns of more stringent financial regulations, with nearly 1,000 stocks in decline. The Shanghai Composite Index was down 1% at the midday break, falling to a two-month low and putting the decline since Friday at more than 3%.

Fears over more financial irregularities at Chinese banks dragged down shares in the sector, after China Minsheng Bank said in a statement late Tuesday that the head of one of its subbranches was under investigation for violation of laws. The bank's Shanghai-listed shares were down 1% on Wednesday.

Elsewhere, Australia's S&P/ASX 200 was down 0.7%, while the Nikkei Stock Average slipped between gains and losses, and was recently up 0.1%, aided by a softer yen. Korea's Kospi was off 0.5%.

"It's a little bit of risk-off [sentiment] and geopolitical concerns are still on investors' minds," said Christoffer Moltke-Leth, director of global sales trading at Saxo Capital Markets.

Hong Kong's Hang Seng Index continued declines after staging its biggest daily percentage drop in four months the previous session.

The index, which was down 0.6% in midday trading, has also been hurt by weaker market liquidity: the southbound flow on the Stock Connect program, which allows investors in Shanghai and Shenzhen to buy Hong Kong-listed stocks, was at just 113 million Hong Kong dollars (US$14.5 million) on Tuesday, the lowest level since the launch of the Shenzhen-Hong Kong portion of the link late last year.

In currencies, the pound was treading water after rallying around 2% against the dollar during the European session following Ms. May's announcement. The pound soared overnight following news of a snap U.K. election, "simply because [sterling] has been sold excessively," said Mizuho Bank chief market economist Daisuke Karakama in a note.

Meanwhile, Chinese Premier Li Keqiang said the government will keep the yuan's exchange rate steady and at a "reasonable and equilibrium level."

Foreign companies are willing to sign more long-term orders due to their expectations for a stable yuan, Mr. Li saidin a statement late Tuesday. China's exports rose 8.2% in the first quarter from a year earlier and imports jumped 24%. The yuan is up 0.9% this year versus the dollar.

Earlier Wednesday, the People's Bank of China strengthened the yuan at its daily fixing by 0.3% against the dollar, due mainly to the U.S. currency's weakness. "The dollar weakened broadly after U.K. Prime Minister May called for snap elections in June," said Gao Qi, currency strategist for emerging market Asia at Scotiabank.

Looking ahead, some market participants believe the bearish trend engulfing markets could hit a fork in the road following the French election.

Should far-right candidate Marine Le Pen win, markets will likely to nosedive further, said Margaret Yang, market analyst at CMC Markets. If Ms. Le Pen loses, markets could see a strong rebound.

"It will mean that populism is not that popular," Ms. Yang said.

In the U.S., stock markets ended lower Tuesday as earnings in the banking and health-care sectors fell short of expectations. The Dow Jones Industrial Average fell 0.6%, the S&P 500 lost 0.3%, and the Nasdaq Composite declined 0.1%.

Gregor Stuart Hunter, Liyan Qi and John Wu contributed to this article.

Write to Ese Erheriene at ese.erheriene@wsj.com

(END) Dow Jones Newswires

April 19, 2017 01:18 ET (05:18 GMT)

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