China shares flat, strong mainland property limits HK losses

(Updates to midday)

* HSI down 0.5 pct, Shanghai index up 0.02 pct

* Higher-than-expected China inflation pares bank shares

* Chinese property developers strong on lower housing inflation

* Trading in Alibaba.com suspended in Hong Kong

By Clement Tan

HONG KONG, Feb 9 (Reuters) - China shares were flat at midday on Thursday, with strength in property developers outweighing losses in financial and resources sectors after higher-than-expected January inflation tempered expectations of a cut in banks' reserve requirements.

But housing inflation declined, further bolstering sentiment in the sector following a move to support first-time home late on Tuesday, suggesting Beijing's attempts at curbing property prices were seeing some success.

Strength in Chinese developers helped limit losses in Hong Kong, with the Hang Seng Index bouncing off intra-day lows, ending down 0.5 percent at midday after briefly testing its 250-day moving average at about 21,023.

The China Enterprises Index fell 0.6 percent, while the Shanghai Composite Index pared early losses to finish virtually unchanged, up 0.02 percent to 2,347.9. The CSI300 Index was flat.

Shortly after markets opened, Beijing announced annual inflation in January had risen to 4.5 percent, higher than a 4.1 percent outlook from analysts polled by Reuters. Annual inflation marked a three-month high and rose for the first time in six months.

"I am not surprised to see inflation higher than expectations, the Chinese New Year seasonal effect is always tough to call. But this should delay any cut in bank reserve rate requirements," said Hong Hao, a Beijing-based CICC global strategist, told Reuters.

The People's Bank of China (PBOC) appears to be waiting for coordinated liquidity action from global central banks, possibly in late February, before moving to cut bank reserve requirements.

Agile Property jumped 7.3 percent in Hong Kong. Shenzhen-listed China Vanke and Shanghai-listed Poly Real Estate, the top two developers by sales, gained 1.6 and 1.7 percent, respectively.

With sentiment improving for a sector that is the biggest concern for many economists, risk appetite among mainland investors also improved. The CSI500 Index, a gauge for small- and medium-sized listings, jumped 1 percent.

KEY DRAGS: CHINESE BANKS, RESOURCES

Driving the markets lower was the policy-sensitive Chinese banking sector. The mainland's biggest lenders were among the top drags on the Shanghai Composite and the Hang Seng indices.

Industrial and Commercial Bank of China (ICBC) and China Construction Bank (CCB) each slipped 1.3 percent in Hong Kong. ICBC lost 0.5 percent in Shanghai.

Protracted Greek debt restructuring talks also weighed on HSBC Holdings Plc, Europe's largest bank and the Hang Seng Index's biggest component. It lost 0.8 percent.

Resource stocks were also weak in Hong Kong. China oil majors, PetroChina Co Ltd and China Petroleum & Chemical Corp (Sinopec) each declined 0.6 percent, trimming its recent outperformance.

Still, CICC's Hong says these dips represent opportunities for investors to buy into growth-sensitive sectors. He favours the Chinese information technology, energy, material and insurance sectors.

On Thursday, Lenovo Group Ltd rose 1.8 percent after posting third-quarter net profit that beat forecasts, although growth slowed for a third consecutive quarter for the world's No.2 PC maker.

Trading in Alibaba.com Ltd shares was suspended, pending an announcement regarding its parent, Chinese e-commerce giant Alibaba Group, which is reportedly planning to buy back the 40 percent stake in it held by Yahoo Inc . (Editing by Ken Wills)