* CSI300 -1.7 pct; SSEC -1.8 pct; HSI -1.4 pct
* Another brokerage tightens margin financing; ChiNext slumps
* Banking shares firm on reform hopes
SHANGHAI, June 4 (Reuters) - China stocks fell on Thursday morning, with investor sentiment soured by signs that more brokerages are starting to tighten margin trading, though banking shares gained on reform hopes.
The CSI300 index fell 1.7 percent, to 5,055.08 points at the end of the morning session and the Shanghai Composite Index lost 1.8 percent, to 4,822.42 points. Hong Kong stocks fell at a slightly slower pace.
Shenzhen's start-up board ChiNext, the bellwether of this round of the mainland's bull run, slumped 3.7 percent.
Small-sized brokerage Golden Sun Securities said on Thursday that to control risks, it would suspend margin financing for purchases of ChiNext shares.
The announcement came a day after Industrial Securities suspended lending to clients to buy shares in certain stocks, triggering fears that the trend of "deleverage" will accelerate amid tighter regulatory scrutiny.
Hou Yingming, strategist at AJ Securities, said the correction is natural, after the market's huge gains this year.
"It's natural to see investors increasingly have different market outlook at this level," Hou said. "You will see more volatility, and sector rotations."
Investors' caution was also rooted in signs of more mega IPOs coming into the pipeline.
Late on Wednesday, China's securities regulators approved a Shanghai initial public offering by Guotai Junan Securities Co Ltd, China's third-largest stock broker by profit. It could raise 30 billion yuan (US$4.84 billion).
During subscription periods, large IPOs freeze large sums. China National Nuclear Power Co Ltd's (CNNPC) $2.13-billion Shanghai IPO this week locked up 1.69 trillion yuan, the most for a single IPO in seven years.
But on the upside, China Securities Journal reported that there was a net capital inflow of 1.46 trillion yuan into the stock market in May.
Thursday's market loss was partly stemmed by strength in banking heavyweights, which analysts attributed to expectations that Beijing soon would allow state lenders to introduce more private investors.
The banking index, up more than 5 percent at one point, ended the morning 2.4 percent ahead.
Bank of Communications jumped 8.3 percent amid talk its shareholder-restructuring proposal could be approved within weeks.
Shares of Shenzhen-listed BYD Co Ltd, the electric carmaker backed by Warren Buffett, jumped to their 10 percent daily limit, and its Hong Kong listing rose 3.8 percent, after it proposed raising over 15 billion yuan through fresh share sales in China.
In Hong Kong, the Hang Seng index dropped 1.4 percent, to 27,274.32 points, and the Hong Kong China Enterprises Index lost 1.5 percent, to 13,909.12.
Most Hong Kong sectors were down, led by IT and energy stocks. (Editing by Richard Borsuk)