HK, Shanghai shares flat; China's Hu reassures market

* HSI locked in narrow band near 13-month high

* China president reiterates stable fiscal policy

* Sinopharm in focus, trims HK debut gains
(Updates to midday)

By Nerilyn Tenorio and Claire Zhang

HONG KONG/SHANGHAI, Sept 23 (Reuters) - Chinese shares were
flat on Wednesday morning as Sinopharm's (1099.HK) debut rally in
Hong Kong lost steam, while Chinese President Hu Jintao's
assurances of a stable monetary policy supported the mainland
markets.

A consolidating Hong Kong market traded in a tight range, but
remained close to the 13-month high hit last Thursday at the
21,700-point level.

Analysts said caution may continue to cap gains in the
afternoon, in line with weak regional trends ahead of a U.S.
Federal Reserve interest rate decision, although underlying
sentiment remained hopeful for an improving economic environment.

"The market is building a new direction," said Belle Liang,
head of research at Core Pacific-Yamaichi International (HK).
"General sentiment at the moment is not that spectacular and that
was reflected in Sinopharm's debut trade."

In Shanghai, blue chips are expected to remain stable ahead
of a one-week national holiday from Oct 1.

Hong Kong's benchmark Hang Seng Index .HSI finished the
morning session down 0.43 percent at 21,608.26 points, with
turnover at HK$33.4 billion ($4.31 billion), up from midday
Tuesday's HK$26 billion.

The China Enterprises Index .HSCE of top locally listed
mainland Chinese stocks was down 0.54 percent at 12,444.25.

Banks and financials were down 1.01 percent, with the
sub-index at 33,799.71, while the property sub-index was 0.17
percent easier at 27,400.69 ahead of a Fed decision on interest
rates.

Index heavyweight HSBC (0005.HK) was down 0.8 percent at
HK$91.05. China's leading lender ICBC (1398.HK) lost 0.65 percent
to HK$6.07, and Bank of China (3988.HK) had slipped 1.39 percent
to HK$4.27.

* Sinopharm Group Co Ltd (1099.HK), China's largest
pharmaceutical products distributor, which raised $1.13 billion
in its IPO, opened up 21.25 percent on its debut before marking a
23.4 percent gain. The stock, which was issued at HK$16, later
trimmed gains to 18.4 percent at HK$18.94.

*Geely Automobile Holdings (0175.HK), China's largest
privately-owned carmaker, was up 17.88 percent at HK$2.11, easing
back from a 25.7 percent initial gain after the lifting of
suspension. The carmaker said earlier that it planned to issue
HK$2.59 billion ($334 million) in convertible bonds and warrants
to an affiliate of Goldman Sachs (GS.N) [ID:nHKG310894].

SHANGHAI

China's key stock index slipped 0.4 percent on Wednesday with
steel shares soft, as worries of more share supplies weighed on
sentiment, although President Hu Jintao offered reassurances that
monetary policy would remain stable.

The Shanghai Composite Index .SSEC was down at 2,885.901
points, after falling more than 2 percent to a two-week closing
low on Tuesday.

Losing Shanghai A shares outnumbered gainers 595 to 309,
while turnover dropped to 58 billion yuan ($8 billion) from 70
billion yuan on Tuesday morning.

State television quoted Hu as reiterating Beijing's "active
fiscal policy and appropriately loose monetary policy".
[ID:nPEK262339]

State media reported that the first 10 companies to be listed
on a new second board for start-up companies, due for launch
soon, would be priced at relatively high levels, reflecting
strong investor interest, while the country's mutual funds would
be allowed to invest in stocks on the start-up board.

Analysts said that while the second board was drawing
investor attention, blue chips on the main board may remain
relatively stable ahead of a one-week national holiday from
Oct.1.

"The index is unlikely to show any clear direction before the
holiday and is expected to be range-bound. The second board will
be attracting all the attention," said Guo Yanlin, head of
Shanghai Securities' research unit.

She added that Chinese investors were interested in going
after new things like start-up shares.

Steel shares were soft, with Tangshan Iron and Steel
(000709.SZ) sank 4.5 percent to 6.59 yuan after industry
consultancy Umetal said its parent Hebei Iron and Steel Group,
the world's fourth-biggest steelmaker, cut key product prices as
excess supply weighs on the market. [ID:nSHA315407]

China International Capital Corp said in a recent research
report that it retained a cautious stance towards the benchmark
index's outlook for this week and October.

Investors may lock in profit before the National Day holiday,
it said, and increased share supply is expected to reach the
market in October, although the launch of new mutual funds and a
steady economic recovery could limit share price falls.

Several high-tech and new energy shares outperformed on
Wednesday, as President Hu on Tuesday vowed to set a new target
to rein in carbon emissions growth as the economy develops.
[ID:nWEN3807]

FangDa Carbon New Material (600516.SS) rose 5.2 percent to
9.40 yuan, while SUFA Technology Industry 000777.SZ and
Shenzhen Woer Heat-Shrinkable Material 002130.SZ both raced up
their by 10 percent daily limits in the morning session.

The average premium of Shanghai A shares over Hong
Kong-listed H shares of the same companies .HSCAHPI closed at
13 percent on Tuesday, its lowest level since early January.

The official China Securities Journal said the dual-listed H
shares of some companies were now more expensive than their A
shares, especially in the financial sector, but analysts said A
shares may stay relatively weak versus their Hong Kong
counterparts, in part reflecting a shift in the spotlight to the
start-up board.
(Editing by Chris Lewis)