June 2, 2017 / 5:01 AM / a year ago

China shares fall on liquidity concern, Hong Kong follows global trend higher

* SSEC -0.3 pct, CSI300 -0.5 pct, HSI +0.4 pct

* Liquidity fears bite before bank health-check, Fed decision

* Hong Kong climbs to 23-month high as global stocks hit record

SHANGHAI, June 2 (Reuters) - China stocks fell on Friday morning, bucking the trend in global markets, as a stronger Chinese currency and fresh restrictions on share sales failed to entice investors fretting about tightening liquidity and uncertain economic prospects.

The blue-chip CSI300 index fell 0.5 percent, to 3,480.36 points by the lunch break, while the Shanghai Composite Index lost 0.3 percent, to 3,094.46 points.

Small-caps continued to underperform, with the start-up board ChiNext sinking to its lowest level since February 2015.

Fleeting euphoria on Wednesday, triggered by regulators’ restrictions on share sales by big shareholders of listed companies, brought gains, but they have been erased in the holiday-shortened week.

“Share sales restrictions don’t address the fundamental issues,” said Su Peihai, analyst at brokerage Guangzheng Hang Seng. “Sentiment is weak because investors worry about liquidity and are pessimistic toward the economy.”

This month, the U.S. Federal Reserve is likely to raise rates and Chinese banks face mid-year health checks from the central bank, so “deleveraging and tighter liquidity” remain the biggest concerns for investors, offsetting any short-term relief from a strengthening yuan, he said.

Echoing such fears, a Moody’s survey published on Friday suggests China’s slowdown and higher corporate debt levels represents the biggest risk to emerging market credit.

Most sectors fell, with consumer and raw material shares among the biggest decliners.


Hong Kong stocks climbed to a fresh 23-month high amid bullish sentiment across world markets.

Global stocks hit record highs and Asian markets rose to their best levels in more than two years, as upbeat data on U.S. manufacturing and employment and buoyant European factory growth boosted investor optimism.

Both the Hang Seng index and the Hong Kong China Enterprises Index added 0.4 percent, lifting them to 25,914.81 points and 10,660.18 points, respectively.

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

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