China, Hong Kong stocks weaken as auto shares, Apple suppliers weigh

HONG KONG, May 26 (Reuters) - China and Hong Kong stocks retreated on Monday as automobile shares slid on price war concerns and Apple suppliers dropped on potential U.S. tariffs.

At the close, the Shanghai Composite index .SSEC weakened 0.1% to 3,346.84. The blue-chip CSI300 index .CSI300 dropped 0.6%.

In Hong Kong, the benchmark Hang Seng Index .HSI was down 1.4% at 23,282.33. The Chinese H-share index listed in Hong Kong, the Hang Seng China Enterprises Index .HSCE, fell 1.7%.

Car-makers slipped, weighing on both onshore and offshore markets, after BYD 1211.HK slashed prices on some of the models to spur sales as competition heats up. Its Hong Kong-listed shares dipped 5.9%, while rival Geely Auto 0175.HK tumbled 9.5%.

*The CSI All Share Automobiles Index .CSI931008 lost 2.9%, the biggest single-day drop in five weeks, while the Hang Seng Automobile Index .HSAMI in Hong Kong tumbled 4.9%.

"The price cuts could put some short-term pressure on earnings," analysts at Sinolink Securities said in a note. "It got investors concerned about profitability, and the sector is likely to enter a correction."

Apple supplier stocks also lost some ground after U.S. President Donald Trump threatened tariffs on imported iPhones. iPhone assembler Luxshare 002475.SZ lost 0.2%.

However, China's yuan CNY=CFXS has strengthened past the 7.17 level after the central bank tightened the midpoint fixing, and analysts say the firming trend of the currency should lend support to the nation's stocks.

"We estimate every 1% of RMB increase versus the USD could boost Chinese equities by 3%," Goldman Sachs' China equity strategist Kinger Lau wrote in a note.

Sectors such as consumer discretionary, property, and brokers typically outperform when the yuan appreciates, he added.