SHANGHAI, Aug 10 (Reuters) - China stocks fell on Wednesday, as slower-than-expected inflation figures reignited market concerns over weak domestic demand and left uncertainties around economic recovery from COVID-19 shocks, while Hong Kong shares also dropped.
** At the midday break, the Shanghai Composite index eased 0.37% to 3,235.38, and the blue-chip CSI 300 index slipped 0.86% to 4,120.62.
** Financials edged down 0.46%, the real estate index lost 0.44%, and healthcare stocks fell 1.6%.
** In Hong Kong, the benchmark Hang Seng Index tumbled 2.07% to 19,588.83, while Chinese H-shares listed in Hong Kong fell 2.35%.
** China's July factory-gate inflation eased to a 17-month low, defying global cost pressures as slower domestic construction weighed on raw material demand, although consumer prices picked up pace, driven mostly by tight pork supplies.
** "The COVID outbreaks in many cities and the lack of further policy stimulus may have led to weaker growth in July," said Zhang Zhiwei, chief economist at Pinpoint Asset Management.
** The weaker demand as suggested by falling non-food prices in July from a month earlier weighed on the consumer sector, with an index tracking the performance of the sector falling 1.57% by noon.
** Semiconductor shares were quite volatile after U.S. President Joe Biden on Tuesday signed a landmark bill to provide $52.7 billion in subsidies for semiconductor production and research and to boost efforts to make the United States more competitive with China's science and technology efforts.
** An index tracking major players of the industry edged up 0.19% by midday, recovering from a more than 2% loss in early trade.
** The defence sector outperformed the market, underpinned by Sino-U.S. tensions over Taiwan, rising 1.33%.
** In Hong Kong, the market tracked global equity losses, as investors were anxiously awaiting U.S. inflation data, which could provide more clues on the Federal Reserve's trajectory of monetary tightening. (Reporting by Shanghai Newsroom; Editing by Rashmi Aich)
