* SSEC +0.3 pct, CSI300 +0.4 pct, HSI -0.5 pct
* China March factory activity grows fastest in nearly 5
SHANGHAI, March 31 China stocks edged higher on
Friday morning, set to snap a four-day losing streak, with
better-than-expected economic data lifting sentiment but gains
were capped as liquidity concerns kept investors in check.
Hong Kong joined an Asia-wide decline, with no support of
southbound inflows and investors balanced positions on the last
day of the month and quarter.
China stocks erased initial weakness and eked out marginal
gains by the lunch break. The CSI300 index rose 0.4
percent, to 3,450.65, while the Shanghai Composite Index
gained 0.3 percent, to 3,219.40.
The blue-chips has lost 1.1 percent so far this week and
gained 4.3 percent this quarter.
Activity in China's manufacturing sector expanded at the
fastest pace in nearly 5 years in March, beating expectations,
an official survey showed on Friday.
"Of course it's a good thing," said Linus Yip, a Hong
Kong-based strategist at First Shanghai Securities.
Yip noted investors had gradually turned their attention
back to fundamentals after U.S. President Donald Trump
encountered setbacks to pass the healthcare bill, casting doubt
on his ability to deliver on the promises of tax cuts and
"Generally China's still on track for recovery but we still
need to wait-and-see how sustainable the momentum will be."
But liquidity concerns curbed investors' appetite for risky
assets, as China's central bank skipped open market operation
for a sixth day on Friday and would drain 290 billion yuan
($42.05 billion) for the week.
The cost of borrowing short-term cash against bonds at
China's stock exchanges more than tripled to as much as 32
percent on Thursday as smaller financial institutions scrambled
for funds before a central bank health-check on the banking
It's a mixed day in the mainland markets.
A gauge of transportation plays lost 1.2
percent at the lunch break, as China's weakening yuan cut $1.6
billion from profits earned by the country's three largest
airlines last year.
Investors piled up defences stocks as U.S. President Donald
Trump foreshadowed a tense meeting with Chinese President Xi
Jinping next week by tweeting on Thursday that the United States
could no longer tolerate massive trade deficits and job losses.
Also supporting the sentiment, China's domestically
developed AG600, the world's largest amphibious aircraft, will
make its maiden flight in late May.
An index tracking defences plays rallied 1.9
percent at midday.
The mainland stock markets will be closed for two days
starting next Monday.
In Hong Kong, the Hang Seng index dropped 0.5
percent, to 24,183.92, while the Hong Kong China Enterprises
Index lost 0.6 percent, to 10,294.10.
The market has lost 0.7 percent for the week and gained 10
percent for the quarter.
Most sectors lost ground, led by services stocks.
Southbound trading between mainland cities and Hong Kong
through connect schemes was suspended until April 5.
($1 = 6.8966 Chinese yuan renminbi)
(Reporting by Jackie Cai and John Ruwitch)