China, Hong Kong stocks fall on Beijing debt-plan letdown

Updates at 0355 GMT

SINGAPORE/HONG KONG, Nov 11 (Reuters) - China stocks dropped and Hong Kong markets hit a three-week low on Monday as Beijing's local government debt-relief package fell short of investors' expectations for economic support.

China's blue-chip CSI300 Index .CSI300 and the Shanghai Composite Index .SSEC fell at the open but later erased most of their losses. Hong Kong's benchmark Hang Seng Index .HSI shed 2.2% and hit its lowest since Oct. 18.

China unveiled a 10 trillion yuan ($1.4 trillion) debt package after market close on Friday to ease local government financing strains and stabilise flagging economic growth.

But it contained no direct stimulus, or spending aimed at consumers, which investors have been holding out for since Chinese authorities started stepping up promises in late September to fix the ailing economy.

"I think slowly the market's just got used to the fact that this is not going to be about consumption," said Sat Duhra, a portfolio manager at Janus Henderson in Singapore.

The falls were less severe than the selling in U.S.-listed Chinese firms on Friday .HXC. However, the Hang Seng now trades about 13% below its early October peak and the Shanghai Composite about 6% beneath its October high.

Analysts say China needs to do much more to meet the Communist leadership's goal of around 5% gross domestic product growth, as the world's second-largest economy tackles a property market downturn and weak confidence.

Data over the weekend showed the country's consumer prices rose at the slowest pace in four months in October while producer price deflation deepened. The CSI consumer staples index .CSICS fell 2% on Monday, while shares of Hong Kong-listed consumer staples firms .HSCICS lost 3%.

"China's leadership sees less need for stimulus than most commentators," said Mark Williams, chief Asia economist at Capital Economics.

"Its priority instead seems to be structural issues."

SEMICONDUCTORS JUMP

Trade tensions are also in focus as markets digest the election of Donald Trump as the next U.S. President - something investors say China is much better prepared for than in 2016.

Reuters reported, citing an unnamed source, that the U.S. had ordered chipmaking giant TSMC 2330.TW to halt shipments of advanced chips to Chinese customers, and investors responded by buying Chinese chip stocks in anticipation of state support.

The CSI Semiconductor Index .CSI931865 jumped more than 6% to flirt with a three-year high. Hong Kong's Hua Hong Semiconductor 1347.HK soared 11.6% to a one-month high.

Information technology shares .CSIINT advanced 4% to their highest in over 1-1/2 years.

Elsewhere, Chinese energy .CSIEN and property .CSI000952 shares were down 2.15% and 3.4%, respectively, with the latter unwinding recent gains.

China's yuan CNY=CFXS was under pressure at 7.1824 per dollar.

(Reporting and writing by Rae Wee in Singapore. Additional reporting by Jiaxing Li in Hong Kong and Reuters' Shanghai Newsroom; Editing by Jamie Freed and Muralikumar Anantharaman)

((jiaxing.li@thomsonreuters.com))