China, Hong Kong shares slide as bank and casino stocks retreat

Tue Jun 17, 2014 12:56am EDT

* HSI -0.6 pct, H-shares -0.6 pct, CSI300 -0.8 pct

* Chinese banks pull back after a rally on Monday

* Vanke slumped to 3-week low ahead of May housing data

* Macau casinos weaker, hit by shorter permitted stay for Chinese tourists (Updates to midday)

By Grace Li

HONG KONG, June 17 (Reuters) - Shares in Hong Kong and China fell on Tuesday as investors took profits in banking sectors following a strong rally in the previous two sessions.

Sentiment was also dampened by weak data from China.

The amount of new foreign investment China attracted in May shrank by the most in 16 months, hurt partly by its cooling economy, though the trade ministry said the outlook may be brightening for exporters.

By midday, the Hang Seng Index and the China Enterprises Index of the top Chinese listings in Hong Kong were each off 0.6 percent. The HSI finished the morning session at 23,170.29 points.

On the mainland, the CSI300 of the leading Shanghai and Shenzhen A-share listings fell 0.8 percent. The Shanghai Composite Index also slipped 0.8 percent to 2,068.70 points, after posting a nearly two-month closing high on Monday.

"The indexes were mainly dragged down by some heavyweight stocks like the banks, which posted strong gains yesterday," said Cao Xuefeng, head of research at Huaxi Securities in Chengdu.

"There's not enough funds to flow into these counters to support the uptrend. Also, sentiment might be hurt as the central bank said it didn't expand the scope of targeted loosening," Cao added.

Chinese banks outperformed on Monday afternoon after four listed banks confirmed they were qualified for a reduction in reserve requirements announced by the central bank last week.

That had sparked speculation that the loosening measures would be extended to more banks, which the People's Bank of China denied on its official Weibo site later on Monday, reiterating that the cut only applies to banks which lend substantially to small firms and the farm sector.

China Merchants Bank and China Minsheng Banking Corp slipped 0.9 and 0.5 percent, respectively.

Property giant China Vanke slid 1.8 percent to a three-week low after a drop of 2 percent in the previous day, while Poly Real Estate Group shed 1.6 percent.

Markets are bracing for China's May house price figures on Wednesday. A sharp deterioration in the already-cooling property sector would increase the risks to the banking system and the broader economy.

Macau casino shares extended a decline which began in mid-March on fears of weaker growth prospects.

The world's gambling capital said late on Monday it would shorten the permitted transit time stay for Chinese tourists to five days from the current seven days from July 1.

New World China Land dived more than 15 percent to its lowest in more than three months, after the company said its shareholders have rejected its controlling shareholder New World Development's (NWD) HK$18.6 billion ($2.40 billion)offer to take the company private. NWD lost 1 percent.

($1 = 7.7515 Hong Kong Dollars) (Editing by Kim Coghill)