May 10, 2016 / 5:26 AM / in 2 years

RPT-China stocks steady after 2-day slump; Hong Kong indexes dip

(Repeats with no change to text)

* CSI300 +0.4 pct; SSEC +0.2 pct; HSI -0.1 pct

* China April inflation data paints mixed picture

* Investor confidence weakened in April.

SHANGHAI, May 10 (Reuters) - China stocks steadied on Tuesday morning after shedding more than 5 percent in the previous two sessions, but market sentiment remained bearish on concerns over the economy.

Hong Kong shares dipped, as the energy sector dropped on weak oil prices.

China’s blue-chip CSI300 index rose 0.4 percent, to 3,076.28 points by the lunch break, while the Shanghai Composite Index gained 0.2 percent, to 2,837.58 points.

The market’s calmer tone followed a two-day slump that knocked it to eight-week lows on Monday, as investor hopes for a strong economic recovery fade.

April inflation data early on Tuesday showed China’s consumer prices rising slightly less than expected, while a four-year slump in producer prices continued to show signs of moderating.

Investors continue to digest policy signals from an article published in the official People’s Daily on Monday.

The newspaper, regarded as the Communist Party’s mouthpiece, said in the article the country may suffer from a financial crisis and economic recession if the government relies too much on debt-fuelled stimulus.

Shen Weizheng, fund manager at Shanghai-based Ivy Capital, said that he was now much less bullish on stocks, interpreting the article as a sign that Beijing will rein in credit expansion after the first quarter’s lending surge.

In more evidence of weak sentiment, an index tracking investor confidence fell sharply, to 48.8 points in April, from 54.7 points in March.

The index was compiled by the state-backed China Securities Investor Protection Fund, and a reading below 50 indicates investor pessimism.

Most sectors were firm on Tuesday morning, with transportation and consumer sectors rebounding more than 1 percent. Resource shares, however, continued to fall.

In Hong Kong, both the Hang Seng index and the Hong Kong China Enterprises Index were down 0.1 percent by the lunch break, at 20,146.16 points and 8,441.74 points.

Reporting by Samuel Shen and Pete Sweeney; Editing by Jacqueline Wong

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