* CSI300 -1.6 pct; SSEC -2.1 pct; HSI +1.1 pct
* Falls rooted in margin loan tightening, worsened by IPOs
* Less room seen for money easing after May home price data
* Infrastructure, transport stocks lead declines
By Samuel Shen and Pete Sweeney
SHANGHAI, June 19 (Reuters) - China’s stock markets continued a sharp correction on Friday morning, with main indexes heading for their biggest weekly fall in seven years amid worries that the fuel for an eight-month bull run is disappearing.
The key CSI300 index fell 1.6 percent by midday, while Shanghai’s benchmark SSEC lost 2.1 percent. At midday, both indexes were down more than 9 percent for the week.
At the end of the morning, the CSI300 was at 4,852.39 points and the SSEC at 4,687.32 points, both down about 10 percent from their June peak, a level seen by some as suggesting the market has entered a technical correction.
This week’s correction was triggered by regulators’ fresh moves to tighten margin financing - a key engine of the market’s frenzied rally - and worsened by a tidal wave of initial public offerings that greatly increase share supply.
And signs of improvement in the real estate market - China’s nationwide home prices rebounded for the first time in 13 months in May - are triggering concerns the government will no longer be eager to pump money into the economy.
“Recently, elements that curb the market’s rise are emerging,” Bosera Asset Management Co said in a note on the correction.
”First... room for further monetary easing could be less than anticipated, and inflows of new investors could have already peaked.
“Secondly, a highly-leveraged bull (market) is not sustainable,” Bosera said, citing moves by the government to reduce margin loans, which the asset manager estimates have reached between 3 trillion and 4 trillion yuan.
David Dai, Shanghai-based investment director at Nanhai Fund Management Co, said “It’s natural for investors to sell some stocks as valuations of some are staggeringly high.”
Eleven companies launched IPOs on Thursday, and another nine start taking subscriptions on Friday, putting enormous pressure on liquidity.
Nearly all sectors were down, with infrastructure and transport stocks leading the decline.
The banking sector also experienced a significant correction.
Hong Kong stocks performed better. The Hang Seng index added 1.1 percent, to 26,984.05 points, while the Hong Kong China Enterprises Index gained 1.3 percent, to 13,441.73.
Analysts said that the Thursday veto of a Beijing-based electoral reform package was anticipated and put an end to political uncertainty for now.
“This is interpreted as good news by some investors,” said Chen Zhizhong, strategist at China Merchants Securities.
“But investors’ risk appetite is still weak, as a possible free fall in mainland market could weigh on the Hong Kong market as well.” (Editing by Richard Borsuk)