September 12, 2016 / 4:56 AM / in 2 years

Hong Kong, China shares tumble on worry US might hike rates next week

* SSEC -2.1 pct; CSI300 -2.1 pct; HSI -2.8 pct

* Shifting U.S. rate expectations to trigger volatility -analyst

* Chinese currency faces depreciation pressure

SHANGHAI, Sept 12 (Reuters) - Hong Kong and China stock markets tumbled over 2 percent on Monday morning, tracking a sharp retreat in global markets as growing concerns of a possible U.S. rate hike next week pushed up bond yields and put renewed depreciation pressure on the Chinese currency.

The Hang Seng index dropped 2.8 percent, to 23,419.37 points by the lunch break, while the Hong Kong China Enterprises Index lost 3.7 percent, to 9,686.56.

Aided by continuous Chinese money inflows, the Hong Kong market had gained over 30 percent since its February low, making a correction natural, some analysts said.

“Shifting US interest rate expectation will trigger volatility in funding costs, bond prices and the RMB. And volatility can spill,” Hong Hao, chief strategist at BOCOM International wrote on Monday.

“Long-term investors should pause for better allocation opportunities ahead in Hong Kong.”

After the European central bank last week disappointed the market by holding its monetary policies unchanged, there are increasing concerns over possible changes in global liquidity conditions amid talk the Federal Reserve might be serious about lifting U.S. interest rates as early as next week.

The prospects of a U.S. rate increase also put pressure on the Chinese currency. The Chinese central bank sharply weakened the yuan’s official fixing on Monday, although the currency firmed by midday as state-owned banks sold dollars to keep the yuan stable.

In China, the CSI300 index fell 2.1 percent, to 3,247.97 points. The Shanghai Composite Index also lost 2.1 percent, to 3,015.13 points.

The China market had been moving within a narrow range over the past weeks, as investors remained on the sidelines with few signs of economic recovery.

Stocks fell across the board in China and Hong Kong.

Reporting by Samuel Shen and John Ruwitch; Editing by Richard Borsuk

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