November 4, 2016 / 4:50 AM / a year ago

Hong Kong shares hurt by U.S. election worries; China stocks firm

* SSEC flat, CSI300 -0.2 pct, HSI flat

* Hong Kong’s anxiety index surge to five-month high

* China shares supported by signs of a stabilizing economy

SHANGHAI, Nov 4 (Reuters) - Hong Kong stocks were on shaky ground on Friday morning after the benchmark index slipped to 2-1/2-month lows in a week marked by mounting anxiety over the outcome of next week’s U.S. election.

China shares ended the morning session roughly flat, and are on track to rise for the fourth consecutive week, with investors taking some comfort from signs showing China’s economy is stabilizing.

Both Hong Kong’s Hang Seng index and the Hong Kong China Enterprises Index ended the morning session barely changed, after recovering earlier losses.

The indexes are set to fall over 1 percent for the week - their second consecutive weekly decline - reflecting suppressed risk appetite in global financial markets with the U.S. benchmark S&P 500’s falling for eight straight sessions in its longest losing streak since the 2008 financial crisis.

Underscoring deepening investor anxiety in Hong Kong, the HSI Volatility Index, a gauge of market stress, shot up to its highest level since the immediate aftermath of the Brexit vote in early July.

Most sectors in Hong Kong fell, with materials and consumer sectors leading the decline.

But sentiment was more stable in mainland stocks as traders said the country’s rigid capital controls acts as a cushion against potential overseas shocks.

The CSI300 index fell 0.2 percent, to 3,359.75 points by lunch break, while the Shanghai Composite Index was unchanged at 3,129.29 points.

David Dai, Shanghai-based investor director at Nanhai Fund Management Co, said he wasn’t too concerned with the heated presidential race between Democrat Hillary Clinton and Republican Donald Trump, because “whoever wins, the impact on China could be mild, and indirect.”

He said the China market is climbing, albeit slowly, amid signs that the economy is stabilizing.

“I don’t see any negative element that will trigger panic selling,” Dai said, adding Beijing has enough resources to engineer a slow depreciation of the yuan.

Following recent upbeat manufacturing and service data, Chinese investors are eyeing a flurry of fresh economic data in the coming weeks that is widely expected to reinforce views that the world’s second-largest economy is stabilising.

Sector performance was mixed in China on Friday, with transport and property shares weaker, while coal and non-ferrous metal remaining firm on the back of higher prices of the raw materials.

Samuel Shen and John Ruwitch; Editing by Shri Navaratnam

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