Offshore Chinese stocks, yuan fall after US tariffs; stimulus in focus

Update prices, add quotes

HONG KONG, Feb 3 (Reuters) - Chinese stocks listed in Hong Kong and the offshore yuan skidded early on Monday as markets reopened after the Lunar New Year to U.S. President Donald Trump's new tariffs, but expectations of increased domestic policy support helped pare initial losses.

The Hang Seng China Enterprises Index .HSCE was down 0.8% at the midday trading break, and the Hang Seng Tech Index .HSTECH weakened 0.7%, both recovering from steeper morning losses.

Hong Kong's benchmark index .HSI fell 0.3% after dropping as much as 1.7% to a one-week low during the morning session.

The offshore yuan CNH=D3 also trimmed losses to trade at 7.3569 against the dollar, having earlier pushed to a record low of 7.3765 yuan.

Hong Kong's markets reopened on Monday while those on the Chinese mainland resume trade on Wednesday.

Trump slapped China with a 10% levy at the weekend as he had threatened last month, calling the measures necessary to combat illegal immigration and the drug trade. China said it would challenge Trump's move at the World Trade Organization and take other countermeasures.

"Sentiment was pressured, but there's also relief that the uncertainty over whether there would be tariffs or not has been resolved," said Kenny Ng, market strategist at Everbright Securities International in Hong Kong.

"The market could now shift its focus to China's stimulus and look for more supportive measures from the legislative meeting in March," he added.

STIMULUS EYED

China's benchmark blue chip index .CSI300 fell 3% in January, surrendering nearly half of September's 40% rally, as investors fretted over the increasingly volatile macro outlook and Beijing's tepid policy response.

Weakening economic growth in the world's second-largest economy could put pressure on policymakers to roll out more forceful support measures.

China's factory activity grew at a slower pace in January, while staffing levels fell at the quickest pace in nearly five years as trade uncertainties increased, a private-sector business survey showed on Monday.

"China's stimulus measures have remained rather measured in the last few months as they awaited tariff news to be able to respond better, and there could be an expectation that authorities could come out with stronger stimulus measures now," said Charu Chanana, chief investment strategist at Saxo.