(Updates to midday)
* HSI slips 0.8 pct, CSI300 down 0.4 pct
* Chinese property weak, trims 2012 outperformance
* HSBC down, U.S. investigation could hit earnings hard
* China State Construction hammered on fundraising plan
By Clement Tan
HONG KONG, July 18 (Reuters) - Hong Kong and China shares slid on Wednesday, dragged lower by Chinese property developers after data pointing to more stable home prices in China doused expectations of easing policies for the sector.
The sector has outperformed both the broader onshore and offshore stock markets this year after recording two straight annual losses as Beijing clamped down on property prices to contain inflation in the world's second-largest economy.
China home prices were flat in June versus May, calculations based on official data showed on Wednesday, breaking eight straight months of decline in a tentative sign that pro-growth government economic policies are gaining traction.
The Hang Seng Index shed 0.8 percent by midday, while the China Enterprises Index lost 0.6 percent - both poised for their first loss in four days.
The CSI300 Index, tracks the top listings in Shanghai and Shenzhen and on which major Chinese stock index derivative products are based, slipped 0.4 percent. The Shanghai Composite Index was flat.
"Investors have to be prepared for policy whipsaws like the one we are seeing today if they want to stay invested in Chinese property developers," said Lee Wee-Liat, BNP Paribas' head of Asia property research.
"The upcoming earnings for the Chinese property sector will be bad, but investors will probably gloss over that. Policy will still be key and they will be watching the guidance the companies provide, especially on their margins since there have been a lot of price cuts," he added.
The Shanghai property sub-index slumped 3.4 percent. Prior to Wednesday, it was up almost 23 percent in 2012, compared to the 1.7 percent loss on the Shanghai Composite Index .
Shanghai-listed Poly Real Estate slumped 4.7 percent. It is still up 42 percent this year. Shenzhen-listed China Vanke slid 3.6 percent. It is up 26.5 percent in 2012.
In Hong Kong, China Resources Land dived 3.7 percent while Overseas Land & Investment shed 2.9 percent. They are up 22.4 and 38.7 percent in 2012, respectively, compared to the 4.7 percent gain on the Hang Seng Index.
HSBC SLIDES
Shares of Europe's largest bank, HSBC Holdings Plc dived 2.4 percent to HK$67.97, nearing the one-month intra-day low at HK$66.05 recorded on July 13 and poised for its worst day since May 30 when it lost 2.8 percent.
A day after a U.S. Senate subcommittee released a 400-plus-page report detailing how the British bank acted as a financier to clients routing funds from the world's most dangerous corners, senators on a panel were sceptical the bank could deliver on promises it had broken before - even though HSBC officials pledged the bank is changing its ways.
"Despite the uncertain potential earnings impact of this issue, we believe that HSBC remains defensively positioned within the sector with a strong balance sheet and our positive view is unchanged," JP Morgan analysts said in a note dated July 17.
China State Construction International Holdings dived 7.7 percent after the company said it was selling HK$2.23 billion ($287.50 million) worth of new shares to its major shareholder, China Overseas Holdings, to raise funds for spending on affordable housing projects. (Editing by Jacqueline Wong)
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