* CSI300 -1.3 pct, SSEC -.14 pct
* Set to break 9 straight days of rises
* Investors took profits after factory survey disappoints
* Futures markets point to rally resuming
SHANGHAI, March 24 (Reuters) - China stocks fell on Tuesday, with investors taking profits after nine straight days of gains after a survey showed manufacturing activity contracted, but futures markets showed the market remains bullish in the medium term.
Activity in China’s factory sector dipped to a 11-month low in March as new orders shrank, adding to signs that the economy has lost momentum despite two interest rate cuts and other policy easing measures since November.
The CSI300 index fell 1.3 percent, to 3,920.18 points at the end of the morning session, while the Shanghai Composite Index lost 1.4 percent, to 3,638.07 points, but both remained near their highest levels since 2008.
“The weak HSBC flash (reading) may exert some corrective pressure on economy-related stocks such as banks, steel and construction materials, but overall the potential for a sharp fall in the main indices are not likely,” said Xiao Shijun, analyst at Guodu Securities in Beijing.
“This is mainly because China is still in a monetary easing cycle and regulators have repeatedly pledged to support the stock market. As a result, sentiment remains robust, preventing a deep correction despite the market’s recent rally.”
Indeed, mainland stock investors have been celebrating economic bad news as it has been seen as strnegthening the case for deeper and more profound liquidity injections and stimulus going forward. The rally which began in late November was set off by a surprise interest rate cut.
Investors see further gains to come. China CSI300 stock index futures for April fell 0.9 percent, to 3,951, but are still trading 30.82 points above the current value of the underlying index, and contracts for September are still pricing over 4,000 points.
Hong Kong’s Hang Seng index dropped 0.6 percent, to 24,343.99 points. The Hong Kong China Enterprises Index lost 1.8 percent, to 11,965.29. (Reporting by Pete Sweeney and Lu Jianxin; Editing by Kim Coghill)