SHANGHAI, May 19 (Reuters) - China and Hong Kong stocks sagged on Monday, as weak local data on industrial and retail sales highlighted ongoing economic challenges, although the Sino-U.S. tariff reprieve continued to lift shares of port operators.

** China's blue-chip CSI300 Index .CSI300 dropped 0.4% by the lunch break, while the Shanghai Composite Index .SSEC lost 0.1%. Hong Kong benchmark Hang Seng .HSI traded 0.5% lower.

** China and Hong Kong markets have recovered ground lost since Donald Trump's "Liberation Day" tariffs in early April, as Beijing and Washington announced a 90-day tariff pause last week. But the rally appears to be losing steam.

** Official data showed on Monday that growth in China's industrial output and retail sales slowed in April, curbing risk appetite.

** Guosheng Securities cautioned investors against chasing stocks "before concrete evidence points to a better-than-expected economy."

** "Fluctuation within a wide range remains our base case scenario," the brokerage wrote.

** But shares of Chinese port operators continued to surge, as investors doubled down on bets that the 90-day tariff pause will spur a rush in shipment.

** Lianyungang Port 601008.SS, Ningbo Port 601018.SS and Zhuhai Port 000507.SZ all hit their daily upward limit of 10%. Shares of other major port operators such as China Merchants Port Group 001872.SZ and Shanghai International Port 600018.SS also rose sharply.

** "Exporters may continue to boost production and delivery in the next few months in case tariffs are hiked again down the road," said Zhiwei Zhang, president, Pinpoint Asset Management.

** China Securities Co analysts said the tariff reprieve may "spur a shipment rush that leads to a burst of businesses" for port operators.

** Hong Kong-listed shares of Midea Group 0300.HK and ZTO Express 2057.HK jumped after the Hang Seng Indexes Co said they would be added to the Hang Seng Index early next month.

** Shares of China Literature 0772.HK plunged more than 8%, on announcement it would be removed from the Hang Seng Tech Index .HSTECH.

(Reporting by Shanghai Newsroom; Editing by Sherry Jacob-Phillips)

((samuel.shen@tr.com))