* CSI300 -0.4 pct, SSEC -0.6 pct
* HSI -0.4 pct, HSCE -0.7 pct
SHANGHAI, July 28 (Reuters) - Chinese stocks fell on Thursday, extending sharp losses in the previous session, as investors sold financials on news that regulators are planning a crackdown on wealth management products to curb risks to the banking system.
China is considering restricting investments by small banks in the rapidly growing $3.5 trillion wealth management product (WMP) industry, draft rules seen by Reuters showed, as concerns grow that they are taking increasing risks.
The curbs could include capping their investment in the stock market.
That made for a rough trading day on Wednesday, with benchmarks dropping over 3 percent in mid afternoon before recovering slightly.
"The move is expected to slow cash inflows into the stock market, although details of how the curbs will be implemented are still void," said Zhang Qi, senior analyst at Haitong Securities in Shanghai.
"Faced with the uncertainty, share prices may have the potential to fall further in near term, but the room should be limited as the funds to be restricted are also seen limited."
The CSI300 index fell 0.4 percent to 3,204.89 points at the end of the morning session on Thursday, while the Shanghai Composite Index lost 0.6 percent to 2,973.59.
China CSI300 stock index futures for August rose 0.8 percent, to 3,183.6, some 21 points below the current value of the underlying index and suggesting investors see further losses.
The Shanghai financial index >SSE180FI> fell 1.2 percent, with top lender Industrial and Commercial bank of China dropping 0.5 percent.
Top insurer China Life Insurance slumped 1.7 percent.
China insurance industry profits fell 54.05 percent in the first half of the year to 105.6 billion yuan ($15.85 billion), even as premiums and assets surged, the insurance regulator said on Thursday.
Auto shares, on the other hand, rose after positive earnings from Changan Auto's joint venture with Ford.
In Hong Kong, the Hang Seng index dropped 0.4 percent to 22,123.33, while the Hong Kong China Enterprises Index lost 0.7 percent to 9,051.65. Financials saw slightly bigger losses.
The index measuring price differences between dual-listed companies in Shanghai and Hong Kong stood at 127.39.
A value above 100 indicates Shanghai shares are pricing at a premium to shares in the same company trading in Hong Kong, and vice versa.
The northbound quota for the Hong Kong-Shanghai Stock Connect, currently set at 13 billion yuan, saw net inflows of 0.09 billion yuan.
Total volume of A shares traded in Shanghai was 11.10 billion shares, while Shenzhen volume was 12.94 billion shares.
Total trading volume of companies included in the HSI index was 0.8 billion shares.
($1 = 6.6618 Chinese yuan renminbi)
Reporting by Lu Jianxin and Pete Sweeney; Editing by Kim Coghill