* SSEC +0.2 pct, CSI300 +0.5 pct, HSI -0.6 pct
* MSCI says will add 222 China stocks to EM Index next year
* MSCI says decision should draw $17-$18bln into China initially
* Traders say announcement was largely expected, priced in
SHANGHAI, June 21 (Reuters) - China stocks edged up only slightly on Wednesday as investors gave a lukewarm reception to a move by index provider MSCI to add some mainland shares to one of its key benchmarks, with traders saying a "Yes" decision had already been priced in.
But Hong Kong stocks were hit by the news, amid concerns that an increasingly open, and internationally recognized China market threaten to weaken the city's role as a proxy destination for China-bound investment.
China's blue-chip CSI300 index rose 0.5 percent to 3,564.62 points by the lunch break, while the Shanghai Composite Index gained 0.2 percent to 3,144.71.
While the CSI300 lagged a global stock rally earlier this year, it had surged nearly 8 percent since mid-May, partly on expectations of the MSCI decision.
As a result, traders said the news prompted some investors to take profits in blue-chips, which are no longer considered cheap after their recent run-up.
"The result is not a surprise," said Hu Yuanzhi, Shanghai-based fund manager at Rationalstone Investment, noting that even ahead of the announcement, some investors were pocketing gains.
Some also attributed the market apathy to the largely symbolic nature of the MSCI decision.
The U.S. index publisher will add 222 yuan-denominated A shares to its MSCI Emerging Markets Index, with an initial weight of just 0.73 percent, and the change will only take effect beginning in June 2018.
"Flows in the short term are actually (expected to be) quite modest, probably about $12-14 billion of flows from active and passive in year one after inclusion," said Rakesh Patel, head of Asia Pacific equities at HSBC.
"But on a five-10 year view, there's potential for $500 billion worth of inflows, which is huge. This is based on full-weight, full inclusion for both MSCI and FTSE."
Consumer and financials - the two main sectors to be included in the MSCI EMI - posted solid gains, up 0.9 percent and 0.4 percent, respectively.
But Hong Kong stocks fell on the news. The Hang Seng index dropped 0.6 percent to 25,700.44 points, while the Hong Kong China Enterprises Index lost 0.5 percent to 10,413.54.
Alex Wong, a director at Ample Finance Group said: "The (Hong Kong) market was ...under pressure this morning on anticipation of capital outflows in the very long run due to the inclusion."
Ronald Chan, chief investment officer at Manulife Asset Management, Asia, said: "The universe to choose from is much larger in the domestic Chinese market compared to that of Hong Kong."
Reporting by Samuel Shen and John Ruwitch; Editing by Kim Coghill