* The Fed is expected to start shrinking its balance sheet
* Concern emerges on seasonal liquidity stress in China
SHANGHAI, Sept 19 (Reuters) - China and Hong Kong stocks dipped on Tuesday morning, despite Wall Street’s record-breaking run, as traders await clues on U.S. monetary policy from the coming Federal Reserve meeting and mixed China economic data has contained investor appetites.
China’s blue-chip CSI300 index fell 0.2 percent, to 3,835.12 points by the lunch break, while the Shanghai Composite Index lost 0.3 percent, to 3,353.04 points.
The Hang Seng index dropped 0.1 percent, to 28,142.56 points, and the Hong Kong China Enterprises Index shed 0.5 percent, to 11,140.58.
At a two-day meeting beginning later on Tuesday, the Fed is expected to take another step toward policy normalization and announce plans to begin unwinding its $4.2 trillion portfolio of Treasuries and mortgage-backed securities.
China Investment Securities (HK) said it expects the Fed to “reduce its balance sheet gradually, thus, the initial impact on the capital markets would be limited”.
Caution reigned in Hong Kong’s equity market, after Hang Seng’s 28 percent surge this year, even as the Dow Jones Industrial Average and the S&P 500 closed at record highs again on Monday.
Risk appetites has also been suppressed by a mixed bag of China economic data recently, which gave signs of a slowdown in some aspects of the economy, such as fixed-asset investment, but offered support for optimism elsewhere, such as stronger-than-expected lending.
In China, there’s emerging concern over seasonal liquidly stress toward the end of the third quarter, due to a long holiday and central bank health checks on commercial banks. .
A type of three-week interbank borrowing rose to over 4.9 percent on an average weighting on Tuesday morning, the highest level in three months, as the week-long holiday starting with Oct. 1 National Day approaches.
Most sectors fell in China, but property stocks continued to surge, with an index tracking the sector jumping more than 3 percent.
In Hong Kong, IT shares were strong, led by Tencent Holdings , which hit record highs.
Reporting by Samuel Shen and John Ruwitch; Editing by Richard Borsuk