China shares drop after long holiday break, Hong Kong rises for 2nd day
* HSI +0.8 pct, H-shares +0.8 pct, CSI300 -0.6 pct
* Chinese financial and consumer plays drop after weak China services PMI
* Hong Kong rises on short-covering
* Sinopec drops 2.2 pct after a broker downgrade
By Yimou Lee
Feb 7 (Reuters) - China shares fell on Friday in their first trading session of the new Lunar New Year, dragged down by Chinese financial and consumer stocks on further signs that the world's second-largest economy was losing momentum.
Hong Kong shares rose for a second day as investors covered short positions in some hard-hit counters after a recent sell-off that pushed the benchmark index to its lowest in almost seven months.
By midday, the CSI300 index of the leading Shanghai and Shenzhen A-share listings was down 0.6 percent, while the Shanghai Composite Index slipped 0.2 percent to 2,028.34 points as traders returned from a long holiday break since Jan. 31.
The Hang Seng Index was up 0.8 percent at 21,589.92 points. The China Enterprises Index of the top Chinese listings in Hong Kong also rose 0.8 percent.
They have fallen 2 percent and 2.1 percent so far this week, respectively.
"If you consider recent drops in the overseas markets, the A-share market is doing quite well today," said Ben Kwong, Hong Kong-based chief operating officer of stockbroker KGI Asia.
"After the recent selloff, investors are covering short positions and cultivating a rebound, which may not be sustainable," Kwong said. "It's an up and down market, jumping like a horse."
The HSBC/Markit Services Purchasing Managers' Index (PMI) retreated to 50.7 in January, its slowest pace in almost 2-1/2 years after firms secured a smaller volume of new business, a private survey showed, adding to growing signs of slackening in the Chinese economy.
Leading losses in China were financial and consumer counters. Ping An Insurance Group Co of China Ltd dropped 2.7 percent to its lowest in more than two months, while Retailer Suning Commerce Group fell 2.5 percent.
Chinese property companies were also weak after local media reported tepid home sales in first-tier cities during the week-long holiday. China's largest developer by sales China Vanke fell 1.5 percent to a two-week low, while Poly Real Estate shed 0.8 percent.
In Hong Kong, shares in Lenovo Group Ltd fell 0.4 percent after Google Inc acquired 618 million shares, about 5.9 percent of holdings in the Chinese PC giant, in the open market on Jan. 30, according to a disclosure from the Hong Kong stock exchange late on Thursday.
China Petroleum & Chemical Corp was hit by a downgrade from "neutral" to "underperform" from Bank of America Merrill Lynch analysts. Shares in the company shed 0.5 percent in Shanghai and 2.2 percent in Hong Kong.
Shares of Birmingham International Holdings Ltd plunged 35.1 percent in resumed trading after its executive director had resigned on Wednesday.