HK shares little changed; China stocks slip

* HK, China shares hover after two volatile sessions

* China banks drop in HK ahead of earnings

* Esprit shares jump on German investor sentiment data

By Parvathy Ullatil & Claire Zhang

HONG KONG, Aug 19 (Reuters) - Hong Kong shares weaved in and
out of negative territory on Wednesday as investors exercised
caution ahead of key earnings announcements, including those from
Chinese lenders and top wireless operator China Mobile (0941.HK).

Chinese stocks dropped slightly but managed to hold steady in
the wake of recent volatility after China's three most
influential official securities newspapers published bullish
comments and sought to talk up the market.

"It is difficult to judge regulator attitudes now, but we
expect the market to see a continued period of volatility in the
short term," said analyst Wen Lijun at Nanjing Securities. "Share
valuations are still at high levels and investor confidence is
weak, as indicated by the thin turnover."

Analysts pointed out that it was not unusual in the 18-year
history of China's stock market for state media to try to talk
up the market before regulators come forward with market-boosting
steps.

HONG KONG

By 0400 GMT the benchmark Hang Seng Index .HSI was down 0.2
percent at 20,263.17.

"Upward momentum for the index is weak; resistance is now at
the 10-day moving average of around 20,600 points. In the absence
of major fund inflows, the market will continue to consolidate,"
said Ben Kwong, chief operating officer with KGI Asia.

Bank of Communications (3328.HK), which kicks off the
earnings season for mainland banks on Wednesday, was down 0.4
percent.

The world's largest lender, Industrial and Commercial Bank of
China (1398.HK), which follows on Thursday, had fallen 0.9
percent, while Bank of China (3988.HK) was down 1.1 percent.

Chinese banks boosted lending at a record pace in the
first half of the year but are set to report lower first-half
earnings on compressed interest margins.

The China Enterprises Index .HSCE, which represents top
locally listed mainland Chinese stocks, dropped 0.3 percent to
11,414.05.

Europe-focused fashion brand Esprit Holdings (0330.HK) jumped
4.5 percent after data showed German investor sentiment hit its
highest level in more than three years in August, stoking hopes
for a recovery in Europe's largest economy. [ID:nLI151888] The
German market accounts for nearly half of Esprit's total sales.

Maanshan Iron & Steel (0323.HK) slid 3.9 percent after
posting a loss for the first half of 2009, against a profit a
year earlier, as sales volume and prices of steel products fell
on declining demand amid the economic crisis.

The steelmaker said domestic steel product prices looked
uncertain in the second half, despite expected growth in demand.

SHANGHAI

The Shanghai Composite Index .SSEC was down 0.4 percent at
2900.40 by midday.

Minsheng Bank (600016.SS), China's first private-sector bank,
jumped 1.4 percent to 7.31 yuan to become the most active stock
in morning trade after the lender posted a better-than-expected
22 percent rise in its first-half earnings from a year earlier.

The official China Securities Journal said in a commentary
that China's recovering economy and its continuation of a
relatively loose monetary policy indicated its stock market
should have little potential to melt down.

The Shanghai Securities News said securities mutual funds
were estimated to be able to pump 60 billion yuan ($8.8 billion)
into China's stock market before the start of October, either
from newly approved funds or via new products, offering a buffer
after the market's tumble over the past couple of weeks.

The Securities Times said average stock holdings at China's
funds rose slightly to 87 percent of total portfolios by Monday
from 86 percent at the end of the second quarter, indicating that
Chinese funds have not trimmed their stock positions despite the
market's recent slump.

They said the state media comments would at least signal that
the government would not tighten its monetary policy
significantly for now at the expense of a tumbling stock market.

In a sign of a more stable easy monetary stance, the Chinese
central bank kept auction yields of its bills and bond repurchase
agreements unchanged on Tuesday, signalling the end of a cycle of
liquidity tightening over the past several weeks. [ID:nSHA217211]

China Everbright Securities (601788.SS) fell 7.2 percent to
25.43 yuan after rising 30 percent in its Shanghai debut on
Tuesday.
(Editing by Edmund Klamann and Chris Lewis)