* CSI300 -2.3 pct; SSEC -2.6 pct; HSI -1.1 pct
* Doubt grows on how well China economy is recovering
* Shanghai index falls below 3,000, a technical support level
SHANGHAI, April 20 (Reuters) - China stocks tumbled more than 2 percent on Wednesday morning, as investors sceptical about how much the country’s economy is reviving took profits on shares that have rebounded since early March.
If the losses deepen in the afternoon, Wednesday could be the worst day for China indexes since the end of February.
Thursday’s gloomy sentiment spread to Hong Kong, where key indexes lost over 1 percent despite overnight gains by markets in the United States and Europe.
The Shanghai Composite Index slumped 2.6 percent by lunch break, to 2,965.31 points, falling below 3,000 - seen by many as a key technical support level. The blue-chip CSI300 index fell 2.3 percent, to 3,163.42 points.
The market had bounced roughly 15 percent off Feb. 29 lows, buoyed by upbeat first-quarter economic data, including industrial profit, housing prices and new loan growth.
But the rebound risks losing momentum, amid growing doubt over China’s recovery, which some argue has been debt-fuelled and is unsustainable.
David Dai, Shanghai-based investor director at Nanhai Fund Management Co., called the recovery “still very much old-style, with investment picking up in areas such as infrastructure and real estate” and few signs of progress on structural reforms.
“After the rebound, valuations of many stocks, especially small-caps, are becoming bubbly again, so reducing positions would be a natural choice,” Dai said.
While rebounds in commodity and housing prices have reduced the urgency for Beijing to introduce more stimulus, policy advisers caution it is too early to call an end to a cycle of easing that began in 2014.
“The market is in a game between existing players, and there’s little opportunity for trend followers,” Industrial Securities said a strategy report to clients.
“In the medium term, risk appetite could again be weakened,” the brokerage said, citing factors including rising selling pressure, increasing defaults in the credit market and uncertainty about United States monetary policies.
Shares fell across in the board in China and Hong Kong.
Shenzhen’s start-up board declined over 4 percent, drawing little help from news that China is considering launching the Shenzhen-Hong Kong Stock Connect by the end of July.
Tencent Holdings Ltd, an index heavyweight in Hong Kong, fell 1.8 percent. Its founder Pony Ma said he plans to donate 100 million company shares, worth more than $2 billion, to a new charity fund in one of China’s biggest philanthropic pledges.
Reporting by Samuel Shen and Nathaniel Taplin; Editing by Richard Borsuk