* SSEC -0.5 pct, CSI300 -0.1 pct, HSI +0.4 pct
* China May factory activity contracts in May - Caixin PMI
* Hong Kong property index rises to near 9-month high
SHANGHAI, June 1 China stocks started the month
on a bearish note early on Thursday, after a private survey
showed the country's manufacturing activity unexpectedly shrank
in May for the first time in 11 months, stirring fears of
renewed economic slowdown.
The upbeat mood of the previous session - triggered by
regulators' share sale restrictions - evaporated, as worries
deepened that excessive government intervention would suck the
The blue-chip CSI300 index fell 0.1 percent, to
3,488.36 points by the lunch break, while the Shanghai Composite
Index lost 0.5 percent, to 3,101.37 points.
Sentiment was hit by the Caixin/Markit Manufacturing
Purchasing Managers' index (PMI), which painted a gloomy
picture, and sharply contrasts with official PMI readings on
The index fell to 49.6, weaker than expected, below the
50-point mark which demarcates growth and contraction, and
marked the third month in which the index has fallen.
The fall in the Caixin index appears "consistent with the
recent decline in the price of industrial metals" and is
"consistent with our broader outlook on the Chinese economy,"
said Julian Evans-Pritchard, China Economist at Capital
Economics, in a research report.
"After all, we have long been warning that the rebound in
growth during the second half of last year would prove
And after the market's fleeting euphoria toward regulators'
rules restricting share sales by listed companies' big
shareholders, investors now contemplated the rules' side
Chen Xi, strategist at Dongguan Securities, said regulators'
tougher restrictions on share sales, which were intended to
stabilise the market, could backfire, as "capital would think
twice before entering the stock market, "potentially hurting
stock valuations, especially for small caps.
Small-cap stocks led the market's decline on Thursday, with
the start-up board ChiNext dropping over 1 percent.
In Hong Kong, stocks were firm, aided by continuous strength
in the property sector.
The Hang Seng index added 0.4 percent, to 25,749.34
points, while the Hong Kong China Enterprises Index lost
0.2 percent, to 10,579.44.
An index tracking property shares jumped 0.8 percent
to the highest in nearly nine months, as China Evergrande Group
surged roughly 5 percent, after unveiling plans to
raise $5.8 billion.
(Reporting by Samuel Shen and John Ruwitch; Editing by