May 18, 2016 / 4:56 AM / 2 years ago

China, Hong Kong stocks fall as U.S. rate hike fears revive

* CSI300: -1.3 pct; SSEC: -1.7 pct; HSI -1.7 pct

* Sentiment soured by prospects of early U.S. rate hike

* China property shares firm on encouraging data

SHANGHAI, May 18 (Reuters) - Shares in China and Hong Kong shed over 1 percent on Wednesday after comments from Federal Reserve officials rekindled prospects of a U.S. interest rate rise as early as June.

China’s blue-chip CSI300 index fell 1.3 percent to 3,045.40 points by the midday break, while the Shanghai Composite Index lost 1.7 percent to 2,794.29 points, with both indexes heading toward a fresh two-month low.

In Hong Kong, the Hang Seng index dropped 1.7 percent to 19,781.67, while the Hong Kong China Enterprises Index lost 1.8 percent.

Sentiment in both markets had already been weak in recent months amid concerns that signs of recovery in China’s economy may be short lived and worries that top policymakers are growing more cautious about providing additional stimulus as bad debts mount.

Indeed, a BofA Merrill Lynch Global Research report showed investors’ Chinese growth expectations have fallen sharply in May, with 50 percent of investors expecting a weaker economy, up from 22 percent in April.

Confidence was further hit on Wednesday by overnight weakness on the Wall Street, after strong U.S. consumer prices and other economic data added to the case for an early rate increase, with Dallas Fed President Robert Kaplan saying he would push for a hike in June or July.

Small-caps lead the decline in China, with Shenzhen’s start-up board ChiNext slumping 2.8 percent.

Real estate shares bucked the broader market downdraft after encouraging home price data, but managed only fractional gains.

China’s home prices rose the fastest in two years in April, with gains in regional centres indicating a broader recovery in the country’s housing market beyond the major cities.

Reporting by Samuel Shen and John Ruwitch; Editing by Kim Coghill

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