June 2, 2016 / 5:03 AM / 2 years ago

China shares fall as profit-taking continues; Hong Kong up slightly

* CSI300 -0.3 pct; SSEC -0.2 pct; HSI +0.1 pct

* Some expect the MSCI decision would be catalyst for rebound

* Lenovo shares fall after sell-off by Google

SHANGHAI, June 2 (Reuters) - China stocks fell on Thursday morning as investors took profits on this week’s rally and as concerns about the Chinese economy eroded earlier gains made on expectations mainland shares would be included in MSCI’s emerging market index.

The blue-chip CSI300 index fell 0.3 percent to 3,151.86 points by the midday break, while the Shanghai Composite Index lost 0.2 percent, to 2,907.17 points.

Caution prevailed as China’s manufacturing activity showed signs of steadying in May but remained weak amid soft demand at home and abroad, suggesting the world’s second-largest economy is still struggling to regain traction.

But some analysts believe the market rally will resume if China shares are added to the MSCI index, a decision to be made on June 15.

“Make no mistake, we’re still in a bear market,” said Chang Chengwei, index futures analyst at Hengtai Futures Co.

“But even in a prolonged bear market, there are much-needed rebounds. And I think the MSCI decision would be a natural catalyst for a decent rebound.”

Most sectors, including financials and healthcare fell on Thursday morning although the consumer and real estate sectors remained in positive territory.

Hong Kong shares were up slightly. The Hang Seng index added 0.1 percent, while the Hong Kong China Enterprises Index gained 0.2 percent.

But shares of Tsui Wah Holdings Ltd fell as much as 6 pct, the lowest since Feb. 26, after the restaurant chain operator warned of a drop in annual profit.

Shares of Chinese personal computer maker Lenovo Group Ltd fell to 4-1/2 year lows, after Google Inc’s up to $221 million shares sell-off.

Samuel Shen and Pete Sweeney; Editing by Sam Holmes

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