SHANGHAI: China's stocks tumbled on Tuesday morning, with investors trimming their portfolios on liquidity concerns after the market posted its worst day in six months in the last session.
Hong Kong's share market also extended Monday's weakness in expectation of a possible U.S. interest rate hike this week.
China's blue-chip CSI300 index hit a five-week low and fell 0.8 percent, to 3,383.28 points at the end of the morning session, while the Shanghai Composite Index lost 0.7 percent, to 3,132.14 points.
The benchmark Hang Seng index dropped 0.4 percent, to 22,351.43 points, while the Hong Kong China Enterprises Index lost 0.4 percent, to 9,663.41 points.
Investors were keeping a close watch on the U.S. Federal Reserve's policy meeting starting later in the day, which is widely expected to bring a U.S. interest rate hike for the first time this year, making emerging markets less attractive.
The property sector in the city dropped for the second day, falling more than 1 percent. Hong Kong's currency peg to the U.S. dollar ensures that interest rates follow that of the United States, meaning higher borrowing costs for real estate developers.
Both the mainland and Hong Kong markets got some solace from the energy sector, after oil prices soared overnight. Indexes tracking the energy sector in the city advanced 1.2 percent, and 0.45 percent on the mainland.
"Bad news piled up for the time being, as regulators are reining in their control on insurers," said Li Zheming, analyst at Datong Securities in Dalian, adding that a recent acceleration in approvals for initial public offerings also put pressure on the second board, leaving the markets more vulnerable to the performance of blue chips.
Li noted that stock market sentiment was tempered by concerns over liquidity at the year-end, rising treasury yields in the United States and on the mainland, and higher U.S. interest rates.
China benchmark 10-year treasury yields advanced to a 13-month high by midday.
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