* SSEC -0.6 pct, CSI300 -0.6 pct, HSI -0.5 pct
* China raises short-term rates in fresh tightening signal
* Shares related to missing Chinese-born tycoon slump
SHANGHAI, Feb 3 China stocks eased on Friday
morning, with investors unnerved after Beijing unexpectedly
raised short-term interest rates on the first trading day after
the Lunar New Year holiday.
The bearish sentiment spread to Hong Kong, where the market
was poised for its fourth session of losses and investors
awaited a key U.S. monthly jobs report that would set the tone
for the Federal Reserve's policy outlook.
Both the blue-chip CSI300 index and the Shanghai
Composite Index lost 0.6 percent by the lunch break, to
3,367.42 points and 3,141.10 points, respectively.
The People's Bank of China raised the interest rates on open
market operations by 10 basis points on Friday morning,
reinforcing views that Beijing is opting for a "prudent and
neutral" monetary policy stance this year.
"The move has some impact (in the stock market). First, it
directly affects money market rates, and also it raised the
expectation for further tightening," said Zhang Qi, analyst
at Haitong Securities, noting that declining bond prices hurt
insurers' balance sheets.
Li Zheming, analyst at Datong Securities in Dalian, said
liquidity concerns continue to weigh on sentiment. "The market
is sensitive to the liquidity issue at the moment, but China
didn't offer fresh support after the holiday like we hoped."
Market attention was also on Xiao Jianhua, the missing
Chinese-born billionaire behind Tomorrow Group. The tycoon may
have been abducted by Chinese agents, according to some media
Shares in companies directly or indirectly controlled by
Tomorrow Group slumped - Xishui Strong Year Co Ltd Inner
Mongolia and Baotou Huazi Industry Co Ltd
both tumbled 10 percent by midday, the maximum
Investors had muted response toward a private survey, which
tends to focus more on smaller businesses, showing that China's
factory activity expanded for the seventh straight month in
January, but at a slower pace.
Nearly all sectors in China's mainland markets retreated at
midday but defence stocks outperformed, rising nearly 1 percent.
In Hong Kong, the benchmark Hang Seng index dropped
0.5 percent, to 23,072.64 points, while the Hong Kong China
Enterprises Index lost 0.2 percent, to 9,682.12 points.
The main index has lost 1.2 percent so far this week.
Most sectors fell in the city, led by losses among coal
miners and steel firms, which were hurt by slumping commodity
(Reporting by Jackie Cai and John Ruwitch; Editing by