August 2, 2016 / 4:36 AM / 2 years ago

China shares flat but ChiNext rebounds on signs of foreign interest

* CSI300 -0.1 pct; SSEC flat; Hong Kong market suspended

* Tighter regulations curb risk appetite - analyst

* ChiNext shares rebound on foreign buying

SHANGHAI, Aug 2 (Reuters) - China’s main share indexes were roughly flat on Tuesday morning as trading remained thin, reflecting weak risk appetite brought on by a gloomy economic outlook, tighter regulatory environment, and a flood of new initial public offerings.

Trading in Hong Kong’s securities market has been suspended as Typhoon Nida swept through the city, shutting down most of the financial hub.

China’s blue-chip CSI300 index fell 0.1 percent, to 3,174.51 points by lunch break, while the Shanghai Composite Index was unchanged at 2,954.13 points.

The market is trading near one-month lows as investors digest a slew of company results that has so far painted a mixed picture of the economy - the brokerage and insurance sectors have posted big drops in first-half profit, but the chemicals industry has shown signs of bottoming out.

In addition to lingering economic concerns, investors are also worried about market liquidity as regulators step up their crackdown on speculative trading while nine companies launch initial public offers this week.

“Regulators have tightened supervision recently ... with the aim of curbing asset bubbles, and guiding capital into the real economy,” brokerage Guangzheng Hang Seng wrote in a report.

“This is negative to the stock market, and to some extent hurts risk appetite. We advise investors to be cautious.”

Reflecting weak investor confidence, outstanding margin loans - money investors borrow to buy stocks - have declined for four consecutive days as investors unwound 24 billion yuan ($3.61 billion) of leveraged bets during the period.

But Shenzhen’s start-up board ChiNext rebounded on Tuesday on signs that some foreign investors are bargain hunting China’s small-caps after the index’s recent weakness.

CSOP SZSE Chinext Index ETF - the only exchange-traded fund that allows direct foreign investment into China’s ChiNext board - recorded HK$10 million ($1.29 million) in net inflows in recent days, and trades at a significant 2.44 percent premium over the ETF net asset value, its asset manager said late on Monday. A premium in ETF reflects hot investor demand.

Real estate stocks were also firm on Tuesday, rising 1.3 percent by midday, amid reports that home prices in China’s 100 major cities have posted month-on-month gains for 15 months in a row.

Shares of Bank of Jiangsu surged their maximum 44 percent on Tuesday’s listing debut - typical performance for newly-listed shares in China.

Reporting by Samuel Shen and Pete Sweeney; Editing by Sam Holmes

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