* CSI 300 -0.7 pct; SSEC -0.4 pct; HSI -1.1 pct
* Volatility reduced as market sentiment turns neutral
* China’s industrial sector still faces strong downward pressure
SHANGHAI, July 22 (Reuters) - China stocks fell slightly on Wednesday morning, with volatility decreasing as investor sentiment calmed, and turned neutral following the market’s two-week-old rebound from an earlier collapse.
Hong Kong stocks, which have tracked mainland shares recently, also showed a downward correction.
The CSI300 index fell 0.7 percent, to 4,138.65 points at the end of the morning session, while the Shanghai Composite Index lost 0.4 percent, to 4,000.79 points.
There were signs of growing investor caution, as the Shanghai index has bounced nearly 20 percent from a seven-year low hit on July 9, and is approaching 4,500 -- a level widely seen both as a government target, and a near-term ceiling.
With the market stabilizing, investors have returned their focus to economic conditions, and corporate profit growth.
Giving a reminder that China’s economy has yet to find its feet, the Ministry of Industry and Information Technology warned on Wednesday that industry still faces significant downward pressure and “arduous efforts” are needed to stabilise the economy.
The ministry also said that firms in some industries were facing increasing difficulties in making profits.
Most sectors fell, with real estate and infrastructure stocks among the biggest losers.
But technology and telecommunications shares were generally firmer.
Although the main indexes fell, 1,235 companies rose, outnumbering decliners, which totalled 1,047.
Shares of Chinese telecom equipment maker ZTE Corp rose 1.6 percent in Shenzhen, after reporting 43 percent jump in first-half preliminary net profit, thanks to increased investment in China’s 4G next-generation telecom infrastructure and improved margins in its global business.
Also among the gainers, is Shanghai Feilo Acoustics , whose shares rose 1.4 percent after the company made a non-binding offer to acquire the lamps business of Germany’s Osram.
In Hong Kong, the Hang Seng index dropped 1.1 percent, to 25,251.10 points, while the Hong Kong China Enterprises Index lost 1.9 percent, to 11,650.84.
Stocks in Hong Kong fell across the board, with telecommunications and information technology shares leading the decline. (Samuel Shen and Pete Sweeney; editing by Simon Cameron-Moore)