* CSI300 +1.4 pct; SSEC +0.4 pct; HSI +0.3 pct
* Investors rotate from small caps to blue chips
* Property shares jump for second day on policy support hopes
SHANGHAI, Dec 2 (Reuters) - China shares climbed on Wednesday as investors rotated out of small caps and into blue chips, and as speculation swirled that Beijing will announce more incentives to stimulate the property market.
Hong Kong stocks also rose, but more modestly, as downbeat U.S. manufacturing data raised questions about the U.S. economy and the pace of expected interest rate rises by the Federal Reserve.
In China, the CSI300 index rose 1.4 percent to 3,640.19 points by the lunch break, while the Shanghai Composite Index gained 0.4 percent to 3,468.32.
Money apparently flowed out of more speculative small-caps and into blue-chips, with a 2.9 percent plunge in Shenzhen’s start-up board ChiNext, and a simultaneous surge in banking and real estate stocks.
Property giants such as China Vanke Co and Poly Real Estate Group Co jumped for the second day, on market talks that China will unveil tax incentives to encourage more home purchases.
The sector was also aided by expectations that China’s home prices would rise slightly in the coming year on the back of Beijing’s support, thus relieving some pressure on the slowing economy.
The impact of the yuan being added to International Monetary Fund’s benchmark currency basket has been exaggerated, while China’s economy is far away from hitting a bottom, said Shanghai-based hedge fund manager Liu Haiying.
“The logic of the mainland market is very simple. On the dark side, there’re too few good companies to invest in, as corporate profit and ROE (return on equities) are all heading south,” said Liu, Haiying (Shanghai) Investment Consulting Co.
“On the bright side, there’s too much liquidity. So the key is whether fresh money is flowing into stocks, which I don’t think is the case at the moment.”
In Hong Kong, the Hang Seng index added 0.3 percent to 22,441.55, while the Hong Kong China Enterprises Index gained 0.4 percent to 9,990.92.
Property and financial shares strengthened but energy and technology stocks sagged.
Shares of VTech VTech Holdings Ltd lost over 1 percent after the digital toymaker said a cyber attack on the company exposed the data of 6.4 million children, in what experts called the largest known hack targeting youngsters.
Reporting by Samuel Shen and Pete Sweeney; Editing by Kim Coghill