China's blue-chip CSI300 index fell 0.5 per cent, to 3,080.40 points by the lunch break, while the Shanghai Composite Index lost 0.4 per cent, to 2,840.44 points.
China stocks edged lower in light trade on Tuesday morning amid worries that Beijing might pull back on monetary stimulus while it steps up structural and financial reforms even as the economic recovery struggles to gain traction.
But Hong Kong stocks pushed higher, encouraged by upbeat US and Asian markets, and higher oil prices.
China’s blue-chip CSI300 index fell 0.5 per cent, to 3,080.40 points by the lunch break, while the Shanghai Composite Index lost 0.4 per cent, to 2,840.44 points.
President Xi Jinping said on Monday that China will push forward supply-side reform and increase the number of middle-income earners.
Xi’s remarks, which came after shoddy economic data for April, reinforced expectations that Beijing is reluctant to use further monetary stimulus to stoke growth even as China’s nascent economic recovery peters out.
“The logic underpinning a market rebound has collapsed because the economy is not good, but the government refrains from using fresh stimulus,” said Li Kongyi, strategist at Fortune Securities.
He expects the market to fluctuate within a narrow range for a period of time, possibly punctuated by brief rallies sparked by positives such as the potential MSCI addition of Chinese shares to its emerging markets benchmark.
As part of efforts to win MSCI’s nod, China will tighten rules on listed companies suspending and resuming trade by as soon as next week to crack down on cheating and improve market order.
Most sectors fell in China, with transportation shares leading the decline.
In Hong Kong, the Hang Seng index added 0.3 per cent, to 19,945.09 points, while the Hong Kong China Enterprises Index gained 0.6 per cent, to 8,358.14.
Energy shares jumped in both Hong Kong and China, after oil prices hit six-month highs as the market focused on supply disruptions.