March 3, 2017 / 5:06 AM / a year ago

China stocks likely to end 3-week win streak; Hong Kong falls on rate risks

* SSEC -0.4 pct, CSI300 -0.3 pct, HSI -0.6 pct

* China’s congress is expected to emphasize reform over stimulus

* China Jan service activity grows the least in 4 months - survey

SHANGHAI, March 3 (Reuters) - China stocks fell on Friday morning, and were on track to break a three-week rising streak, as investors awaited an annual parliament meeting that is likely to send more signals of painful reform than market-friendly stimulus.

Hong Kong shares were also weak, touching three-week intraday lows, as a U.S. rate hike looms, and the reality of rising borrowing costs starts to sink in.

The blue-chip CSI300 index fell 0.3 percent, to 3,425.52 points at the end of the morning session, while the Shanghai Composite Index lost 0.4 percent, to 3,217.98 points.

CSI300 is on track to register its first weekly decline in a month, showing the market’s blue chip-led rally is losing steam.

Blue-chips have outperformed small-caps on the back of signs of economic recovery, as well as hopes more fiscal stimulus will be unveiled at the meeting of China’s National People’s Congress (NPC) that starts on Sunday.

However, evidence is building that China’s leaders are expected to telegraph their willingness at NPC to let reforms overtake policy stimulus as their priority , due to concerns about financial instability.

China’s top planning agency said earlier this week that the government will not use “strong stimulus” to galvanize the economy, and the banking regulator said the priority this year would be to ward off financial risks.

On Friday, the stock market was not helped by a private survey showing activity in China’s services sector expanded at the slowest pace in four months in February.

“Investor worries are fermenting, and at this juncture, signs of weakness in one sector would immediately worsen sentiment of the whole market,” Hothot-based Hengtai Securities said in a strategy report.

Most sectors fell on Friday, with the real estate sector dropping on news that the city of Hangzhou is slapping more curbs on property purchases.

Shenzhen’s start-up board ChiNext bucked the trend, up 0.2 percent at midday, despite a nearly 5 percent slump in bellwether stock Leshi Internet Information .

In Hong Kong, the Hang Seng index dropped 0.6 percent, to 23,581.09 points, while the Hong Kong China Enterprises Index lost 0.8 percent, to 10,161.38.

All main sectors fell, with rate-sensitive property stocks among the biggest decliners.

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

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