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* Advantest, Tokyo Electron tumble
* Banking, insurers underperform on falling U.S. yields
TOKYO, May 29 (Reuters) - Japan's Nikkei tumbled to a more than two-week low on Wednesday morning, weighed by companies with large exposure to China, such as those in the chip sector, reflecting persistent concerns about U.S.-China trade frictions.
The worries about the trade war and its impact on global growth drove the a rally in world and local bonds and a selloff in financial stocks.
The Nikkei share average dropped 1.4% to 20,966.00 in midmorning trade, after falling to as low as 20,884.61, the lowest level since May 14.
"Global investors likely decided to unload risky assets as the status of the U.S.-China trade war has not changed," said Shoji Hirakawa, chief global strategist at Tokai Tokyo Research Institute, adding that rising global bond prices are spooking the market.
U.S. President Donald Trump said this week he was "not yet ready" to make a deal with China, although he expected one could be reached in the future. An expanding tariff battle between the two sides has raised concerns the trade war would lead to a global economic slowdown. At the same time, he pressed Japan to reduce its trade imbalance with the United States.
Chip equipment makers Advantest Corp tumbled 4.2%, Tokyo Electron Ltd shed 2.7%, while silicon products maker Sumco Corp dropped 2.3%.
Banking and insurer stocks were sold after benchmark U.S. Treasury yields fell to their lowest levels since September 2017. Mitsubishi UFJ Financial Group fell 1.8%, Sumitomo Mitsui Financial Group declined 1.4% and Dai-ichi Life Holdings sank 2.7%.
On the positive side, Citizen Watch rose 0.6% after it said it will buy back up to 2.2% of its own shares worth 3 billion yen.
All but three of the Topix's 33 subsectors were in the red. Declining issues outnumbered advancing ones 1,449 to 592.
The broader Topix dropped 0.8% to 1,537.96. (Editing by Sam Holmes)