April 27, 2017 / 4:48 AM / 3 months ago

China stocks hit 2-month lows amid tighter regulations; Hong Kong flat

3 Min Read

* SSEC +0.4 pct, CSI300 +0.4 pct, HSI +0.6 pct

* March industrial profits soar 23.8 pct on building boom but pace slowing

* Profit margin pressures intensify for some manufacturers

SHANGHAI, April 27 (Reuters) - China's main stock indexes fell to more than two-month lows on Thursday before paring losses amid lingering concerns about economic growth and tighter regulations.

The blue-chip CSI300 index fell 0.5 percent to 3,426.79 points by the lunch break, after earlier dipping to levels not seen since early February.

The Shanghai Composite Index lost 0.4 percent to 3,128.42.

Profits earned by China's industrial firms rose 23.8 percent in March from a year earlier, still robust but slowing from multi-year highs seen in previous months.

Thursday's data also suggested some firms further up the manufacturing chain were having trouble passing higher input costs to buyers, pressuring profit margins.

That reinforced concerns that China's economy could have peaked in the first quarter and may slow during the rest of the year.

"We remain very cautious about the market for the moment, as regulators continue to tighten grip in deleveraging efforts," said Yang Weixiao, an analyst with Founder Securities.

"The regulatory crackdown on the banking system to contain risks will also draw liquidity out of the stock market," added Yang.

President Xi Jinping called on Tuesday for increased efforts to ward off systemic risks to help maintain financial security, the official Xinhua news agency said. "The policy response demonstrates the authorities’ intention to ensure that financial system de-leveraging doesn’t lead to financial instability," Tim Condon, head of Asia research at ING, said in a note.

"But it will make 2017 a difficult year to make money in Chinese financial markets, in our view. On the positive side, lower China macro risk is positive for risk assets globally."

Main sectors fell across the board, with property shares leading the decline.

Home prices in China's biggest cities would likely rebound if government curbs are relaxed, a senior official from the country's top economic planner was quoted as saying, suggesting authorities are in no mood to lift restrictions any time soon.

Hong Kong

In Hong Kong, the Hang Seng index was little changed at 24,575.01, while the Hong Kong China Enterprises Index lost 0.6 percent to 10,253.23.

Asian shares eased from a near two-year high on Thursday as a long-awaited U.S. tax cut plan failed to inspire investors, though sentiment remained supported by global growth prospects and receding worries about political risks in Europe.

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