China shares fall on financials and property, Hong Kong follows

Mon May 19, 2014 12:55am EDT

* HSI -0.4 pct, H-shares -0.8 pct, CSI300 -1.4 pct

* China April home price data dampens property sector

* Financial sector down on stricter interbank lending rules (Updates to midday)

By Grace Li and Chen Yixin

HONG KONG/SHANGHAI, May 19 (Reuters) - China shares fell on Monday as financials and property stocks fell following stiffer regulations on interbank lending and more evidence of cooling momentum in the property market.

Hong Kong shares also declined with losses mainly seen in the property and energy sectors as investors took profit on gains from last week.

By midday, the Hang Seng Index was down 0.4 percent at 22,627.27 points. The China Enterprises Index of the top Chinese listings in Hong Kong fell 0.8 percent.

The CSI300 of the leading Shanghai and Shenzhen listings shed 1.4 percent, while the Shanghai Composite Index lost 1.1 percent to 2,004.41 points.

Chinese banks were the biggest drag for mainland markets in the morning session, following tougher rules on interbank loans announced late on Friday.

Beijing is tightening its grip on interbank lending with more expansive rules that include capping the size and maturity of loans, a move to defuse risks in shadow banks and better support the real economy. [ID: nL3N0O22I8]

"This is the major reason for today's fall, which hurt not only banking shares, but the whole economy. That is because the off-balance sheet business meets some demand for social financing," said Du Changchun, an analyst at Northeastern Securities in Shanghai.

The finance index slipped 1.7 percent in the morning, with almost all banks declining. Among the top losers, Industrial Bank Co Ltd dropped 2.7 percent and China CITIC Bank Corporation Limited was down 1.9 percent.

The Chinese property sector was left weaker by data on Sunday that showed average new home prices slowed to a near one-year low in April. That added to concerns about the weakness of the property market and raised questions about what policymakers can do if prices start to fall too sharply.

The CSI property sub-index shed 1.4 percent after jumping 2.5 percent last week. China Fortune Land Co Ltd was down 6.7 percent and Yango Group Co Ltd fell 4.4 percent.

In Hong Kong, China Resources Land Ltd lost 2.2 percent, while China Overseas Land & Investment Ltd slid 1.8 percent.

Weakness in the consumer staples sector also added to Hong Kong's losses, with Belle International Holdings Ltd down 2.7 percent.

Want Want China Holdings Ltd was down another 1.8 percent after shedding 6.4 percent last Friday. Nomura downgraded its shares to neutral in a research note to clients on Monday, saying recent price hikes and competitors' increased promotions affected the company's Hot-kid milk sales.

China Travel International Investment Hong Kong Ltd lost 3.1 percent after its Chairman Wang Shuaiting was put under investigation as part of a corruption probe into China Resources.

(Reporting By Grace Li; Editing by Jacqueline Wong)

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