Aug 17 (Reuters) - China shares fell on Tuesday, as lower-than-expected economic data weighed on sentiment, while Hong Kong stocks dropped on Beijing’s latest crackdown on internet sector. ** The CSI300 index fell 0.4% to 4,921.74 at the end of the morning session, while the Shanghai Composite Index lost 0.5% to 3,500.43. ** The Hang Seng index dropped 0.7% to 26,002.66, while the Hong Kong China Enterprises Index lost 0.9% to 9,181.08. **China’s factory output and retail sales growth slowed sharply and missed expectations in July, as new COVID-19 outbreaks and floods disrupted business operations, adding to signs that the economic recovery is losing momentum. **”We expect growth to slow further in the next few months,” said Zhiwei Zhang, Chief Economist of Pinpoint Asset Management. “A big question is whether the government will change its plan on fiscal spending and move the schedule forward.” ** Healthcare sub-index was down 1.9%, while consumer staples sub-index and semiconductor sub-index fell 1.8% and 2.6%, respectively. ** Real estate stocks gained, with the sub-index going up 1.8%, as multiple cities announced rules to cap the land price premium at 15%, which would cut developers’ cost of land purchases. ** “Stabilizing the cost of land purchases and housing prices would ease developers’ worries that their profit might go to zero,” said CITIC Securities in a note. ** An index tracking China’s financial shares gained 0.8%, as investors bet lenders’ asset quality will improve along with developers’ earning outlook. **Shares of internet companies listed in Hong Kong dropped, dragging the city’s Hang Seng Index, following China’s latest crackdown on its tech companies. ** Chinese regulators on Tuesday issued regulations for the internet sector, banning unfair competition and restricting the use of user data, the latest move in a crackdown on the country’s powerful tech companies. ** Video platform Bilibili Inc plunged more than 5% to its lowest level since its Hong Kong debut. ** Internet giants Tencent, Alibaba and Meituan dropped 3.7%, 2.8% and 1.2%, respectively. ** Hang Seng Tech Index declined 1.2%, and healthcare sub-index slipped 2%. (Reporting by Shanghai Newsroom; Editing by Rashmi Aich) Our Standards: The Thomson Reuters Trust Principles.