* HK->Shanghai Connect daily quota used 1 pct, Shanghai->HK daily quota used 7.8 pct
BEIJING, Aug 19 (Reuters) - China stocks edged down on Friday morning on profit-taking pressure, but the blue-chip index is poised for a third consecutive week of gains supported by expectations of more government stimulus.
Gains in financials and M&A activity in the real estate sector were also behind a strong performance in mainland markets earlier in the week.
The CSI300 index, which tracks the largest listed companies trading in Shanghai and Shenzhen, fell 0.4 percent to 3,350.09 points at the end of the morning session. The CSI300 index is up 1.7 percent for the week so far, on track for its third weekly gain.
The Shanghai Composite Index lost 0.5 percent, to 3,090.07 points. It is up 1.29 percent for the week and is set for a second week of gains.
China CSI300 stock index futures for August fell 0.1 percent, to 3,358.4, 8.31 points above the current value of the underlying index.
Mainland stocks had risen earlier in the week, led by financial shares, on hopes the government would roll out more stimulus this year to meet economic growth targets.
Analysts said some investors rushed to take profits on Friday morning, which put some pressure on the indexes.
“I expect to see volatility continue over the next few weeks, but the overall trend of the market is upward,” said Tian Weidong, analyst at Kaiyuan Securities in Shanxi.
The real estate sector fell on profit-taking, with the property subindex falling 1.49 percent as of noon.
In Hong Kong, The Hang Seng index dropped 0.3 percent, to 22,955.41 points. As of noon, the HSI is up 0.83 percent for the week. The Hong Kong China Enterprises Index lost 0.5 percent, to 9,605.25.
Hong Kong Exchanges and Clearing Limited (HKEX) is introducing its new Volatility Control Mechanism (VCM), which would prevent extreme fluctuations and price volatility arising from trading incidents. The new mechanism will come into effect on Monday.
Analysts in Hong Kong expect the new VCM will only have very limited impact on the overall market.
“I don’t think the new mechanism would be easily triggered. And it only applies to 81 stocks that are key constituent stock,” said Sam Chi Yung, senior strategist at South China Financial Holdings in Hong Kong.
Sam added that positive news including the approval of a long-anticipated Shenzhen-Hong Kong stock connect scheme would attract fund flows from mainland due to cheap valuations of shares listed on the Hong Kong market.
Reporting By Winni Zhou and Nicholas Heath; Editing by Shri Navaratnam