China, Hong Kong stocks fall on U.S. ban, bond defaults

* SSEC -0.8%, CSI300 -1.0%, HSI -0.6%

* HK->Shanghai Connect daily quota used -6.2%, Shanghai->HK daily quota used 3.3%

* FTSE China A50 -1.7%

SHANGHAI, Nov 13 (Reuters) - China and Hong Kong stocks fell on Friday following the Trump administration’s decision to ban U.S. investments in firms linked to the Chinese military, with sentiment also hurt by more bond defaults.

** The CSI300 index fell 1.0% to 4,862.01 at the end of the morning session, while the Shanghai Composite Index lost 0.8%, to 3,313.75.

** For the week, CSI300 shed 0.5%, while SSEC was flat.

** U.S. President Donald Trump’s administration unveiled an executive order prohibiting U.S. investments in Chinese firms that Washington says are owned or controlled by the Chinese military.

** The move seeks to deter U.S. investment firms, pension funds and others from buying shares of 31 Chinese companies that were designated by the Defense Department as backed by the Chinese military.

** Heavyweight banking shares led the decline on Friday, with the CSI300 banks index sliding 1.8% on worries over asset quality following corporate bond defaults.

** “There could be more bond defaults in the future, given a backdrop of China’s economic transformation to high quality growth which causes ‘survival of the fittest’”, said Fu Yanping, analyst with China Galaxy Securities.

** However, Fu does not expect a systemic financial risk.

** Chinese highway, street and bridge construction co Chenglong Construction Group Co Ltd said it had defaulted on interest and principal payments on a company bond due on Nov 13.

** China’s interbank bond market regulator said on Thursday that it is launching an investigation into Yongcheng Coal and Electricity Holding Group Co Ltd after the state-owned firm defaulted on a bond payment.

** In Hong Kong, the Hang Seng index dropped 0.6%, to 26,025.21, while the Hong Kong China Enterprises Index lost 0.9%, to 10,480.32. (Reporting by Luoyan Liu and Andrew Galbraith)