* CSI300 -0.6 pct; SSEC: -0.3 pct; HSI: -0.1 pct
* Banks surge on speculation the central bank may buy assets
* ChiNext shares slump on valuation concerns
By Samuel Shen and Kazunori Takada
SHANGHAI, April 28 (Reuters) - Chinese shares fell early on Tuesday led by a tumble in small-cap stocks, but banks surged amid speculation that China's central bank is considering buying commercial bank assets.
The People's Bank of China (PBOC) could offer more funds for state banks to buy local government bonds, some analysts suggested, a move that would be targeted more at alleviating government debt concerns than a change in monetary policy.
Officials from the central bank did not immediately respond to Reuters' request for comment.
The rumour helped fuel a sharp rally in banking shares .
"Many policies had been deemed quite unlikely before, but they eventually materialised. Investors are betting that if such a policy becomes true, banks' asset quality would be greatly improved," Chen Zhizhong, analyst at China Merchants Securities (HK) Co Ltd said.
But investor sentiment was hurt by a 2.4 percent correction in Shenzhen's start-up board ChiNext, which knocked China's main stock indexes from intraday seven-year highs.
The CSI300 index fell 0.6 percent, to 4,780.88 points at the end of the morning session, while the Shanghai Composite Index lost 0.3 percent, to 4,512.76 points.
Hong Kong shares also fell. The Hang Seng index dropped 0.1 percent, to 28,407.31 points, while the Hong Kong China Enterprises Index lost 0.2 percent, to 14,717.89.
Shares of PetroChina and Sinopec Corp , which surged on Monday due to merger speculations, softened after the two oil giants dismissed the rumour, saying they had never received any official information about such a restructuring.
PetroChina shares were flat, while Sinopec shares fell 4.7 percent in Hong Kong, also hit by news that a top executive of Sinopec's state-owned parent was under investigation for suspected "serious disciplinary violations".
But some analysts said investors were still betting that China would accelerate reform of state-owned enterprises.
"This remains a major investment theme this year," said Chen of Merchants Securities, adding that the wording by Sinopec and PetroChina does not amount to a complete denial of a possible merger.
State-owned firms including China COSCO and Merchants Energy Shipping Co continued to surge on expectations of consolidation. (Editing by Jacqueline Wong)