* CSI300 -2.2 pct; SSEC -3.1 pct; HSI -1.0 pct
* Worries deepen that gov’t could be scaling back rescue efforts
* Expectations of further yuan weakness also hit confidence
SHANGHAI, Aug 19 (Reuters) - China stocks slumped again on Wednesday, extending Tuesday’s 6 percent plunge, as investors dumped shares amid growing worries that the government could be scaling back its rescue efforts for the markets.
Confidence was also shaken by continued weakness in the yuan, which could lead to fresh outflows of capital from the country, and uncertainty over what steps the central bank may take next to support the struggling economy.
The CSI300 index fell 2.2 percent to 3,741.40 points by midday, while the Shanghai Composite Index lost 3.1 percent to 3,631.40 points.
Hong Kong stocks followed mainland markets lower. The Hang Seng index dropped 1.0 percent, while the Hong Kong China Enterprises Index lost 1.5 percent.
“Market confidence was hit the most by signs that the ‘national team’ is starting to retreat,” Zhou Lin, analyst at Huatai Securities said, referring to government funds that bought stocks in early summer to halt a market rout.
China’s securities regulator said late last week that the market has normalised and the government would allow market forces to play a bigger role in determining stock prices.
“The market will continue its downward trend .... The government doesn’t have enough money, or willingness to buy shares now,” said Samuel Chien, partner of hedge fund manager Shanghai Boom Trend Investment Management Co.
Investors dumped shares partly owned by the China Securities Finance Corp (CSF), the state margin lender tasked with buying stocks and proping up prices during the recent market sell-off.
An index tracking such shares slumped over 4 percent.
Guangdong Meiyang Jixiang Hydropower Co slumped 6.4 percent, after the previous day’s 10 percent tumble. Fujian Mingdong Electric Power and Citychamp Dartong both fell 10 percent, their daily downward limit.
Chinese importers and firms with heavy exposure to foreign-currency debts continued to fall sharply on expectations of further yuan weakness, following last week’s shock currency devaluation by the central bank.
Airlines, including China Eastern , China Southern and Air China tumbled in both China and Hong Kong.
China’s state-owned enterprises listed in both markets, which had rebounded on reform expectations, also fell sharply, weighing on main indexes, as investors took profits from recent share price gains. (Reporting by Samuel Shen and Pete Sweeney; Editing by Kim Coghill)