* CSI300 -0.5 pct, SSEC -0.4 pct, HSI -0.0, HSCE +0.3 pct
* Funds flow into blue chips, out of small caps
* Related shares in Shanghai FTZ up on hopes of progress
SHANGHAI, Nov 13 (Reuters) - China and Hong Kong stocks eased on Thursday, dragged lower by a slump in small-cap shares, but blue chips held firm ahead of the planned Shanghai-Hongkong connect scheme that is expected to see foreign funds guided into large and mid-cap Chinese companies.
The CSI300 index fell 13.26 points, or 0.5 percent, to 2,581.06 at the end of the morning session, while the Shanghai Composite Index lost 10.27 points, or 0.4 percent, to 2,484.20. The Hang Seng index was little changed, down 9.54 points to 23,928.64.
The Hong Kong China Enterprises Index gained 33.68 points, or 0.3 percent, to 10,763.44.
“We can see most funds moving into blue chips as investors expect the launch will benefit these shares,” said Zhang Yanbing, analyst at Zheshang Securities in Shanghai.
Although Chinese retail investors are finally buying domestic blue-chip stocks, many analysts suspect the rally is short-term pre-positioning by mainland investors expecting to sell out at a profit once foreigners enter.
The NASDAQ-like ChiNext growth board declined 2.5 percent, as investment in blue chips has weakened interest in small caps, which have historically far outperformed the major indexes. ChiNext is up over 32 percent this year, compared to an 11 percent rise in the blue chip CSI300.
Chatter about free trade agreements at Beijing’s APEC meeting and the G20 in Australia this week, kindled hope in Shanghai for progress on the Shanghai Free Trade Zone. Related stocks like Shanghai Lujiazui Finance & Trade Zone Devlopment and Shanghai Jielong Industry Group Corp Ltd got a boost.
The index measuring price differences between dual-listed companies in Shanghai and Hong Kong lost 0.3 points to 101.76.
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.
Dual-listed shares on the index remain in oversold territory at 89.16, according to the 3-day Relative Strength Index.
The total volume of A shares traded in Shanghai was 17.92 billion shares, while Shenzhen volume was 9.64 billion shares.
The total volume traded in Hong Kong was 42.43 billion shares. (Editing by Richard Pullin)