HONG KONG, May 31 (Reuters) - Hong Kong stocks fell more than 2% on Wednesday, just shy of bear market territory, spurred by disappointing Chinese factory data and simmering U.S.-China disputes, which also dragged the yuan to its lowest levels since November.

All Hong Kong major indexes tumbled on Wednesday following an overnight sell-off in U.S.-listed China stocks and as investors fretted over the world's second-largest economy after a plunge in the manufacturing purchasing managers' index (PMI) to a five-month low of 48.8.

By midday, the Hang Seng Index (HSI) had dropped 2.25%, taking the total decline from a Jan. 27 closing high to nearly 20%. If it closes a touch weaker, it would confirm the HSI has been in a bear market.

"The sentiment in the financial market is quite bearish. It is not clear how the government interprets the current economic condition. There is no sign of imminent policy response," said Zhiwei Zhang, chief economist at Pinpoint Asset Management. "

The Hang Seng China Enterprises Index fell 2.35%. An index of Hong Kong-listed tech giants plummeted 2.47%, leading the decline.

The yuan slid to a six-month low of 7.1090 per and is down more than 2.6% this month.

Mainland stocks also fellwith the blue-chip CSI 300 Index dropping 1.1%, while the Shanghai Composite dipped 0.74%.

Nomura chief economist Ting Lu expects strong headwinds from a structural property slump, a deepening global manufacturing downturn and worsening geopolitical tensions will continue to be a drag on the economy.

"We expect the manufacturing PMI to remain in the contraction zone in June," he said in a note.

The HIS has erased almost all its gains since November 2022, when a rally betting on China's reopening after years of stringent pandemic lockdowns began.

Lingering worries over Sino-U.S. tensions have also weighed on U.S.-listed Chinese shares, dragging down funds such as the IShares MSCI China ETF and KraneShares CSI China Internet ETF.

In the latest signs of those tensions, the U.S. State Department warned last week that China was capable of launching cyber attacks against critical infrastructure, including oil and gas pipelines and rail systems, after researchers discovered a Chinese hacking group had been spying on such networks.

Despite their cheap valuations, Hong Kong stocks are unlikely to rebound anytime soon, analysts say.

"Turnover remains low. We don't see big money coming in and buying the dip yet," said Linus Yip, chief strategist at First Shanghai Securities.

The HSI will likely see further selling pressure for the rest of this week, given the U.S. dollar index rebounded while oil prices dropped, showing risk aversion has picked up, said Kenny Ng, strategist at China Everbright Securities International.

Yields on China's benchmark 10-year government bonds hovered around six-month lows of 2.72%, as weaker demand and signs of a slowing economy raised investor hopes for more monetary easing. (Reporting by Summer Zhen; additional reporting by Georgina Lee; Editing by Sonali Paul and Jamie Freed)