HK Hot Stocks - Cathay Pacific gains on broker upgrade

HONG KONG, July 7 (Reuters) - By 0343 GMT, the benchmark Hang Seng Index .HSI was up 0.7 percent at 18,111.66.

The China Enterprises Index .HSCE, which represents top locally listed mainland Chinese stocks, had risen 0.6 percent to 10,886.73.

Here are some of the stocks on the move in early trade-

* Cathay Pacific (0293.HK) jumped 5.1 percent to HK$10.78 after JP Morgan raised its rating on the stock to "overweight" from "underweight" on expectations that the airline's earnings outlook will become more positive.

The brokerage increased its target price to HK$13 from HK$7, saying Asia's third-largest airline would outperform peers with a marginal profit in 2009, helped by its better average loads, cost-cutting measures including capacity rationalization, and mark-to-market fuel hedging gains.

* Sportswear maker Li Ning (2331.HK) rose 2.3 percent after it acquired Kason Sports, one of the top three badminton equipment brands in China, for a total 165 million yuan ($24.15 million).

Li Ning, which launched its own badminton line in the second quarter and is a sponsor of the China National Badminton Team, has been working to increase its presence in the indoor sports market, said DBS Vickers in a research note.

* China Mengniu Dairy (2319.HK) gained after it said it would raise HK$3.058 billion ($394.6 million) from a share sale to China National Oils, Foodstuffs and Cereals Corp (COFCO) and Hopu Investment Management. In addition to the new shares, the two companies will acquire some existing shares in the company to hold 20 percent of the milk producer.

Shares in the company, which saw its sales drop sharply following last year's tainted milk scandal, were up 2.8 percent at HK$19.64.

"Mengniu can stand to benefit from COFCO's domestic and overseas network in the agro-products and food sectors, we believe greater benefit will stem from the addition of a well-entrenched state-owned entity to its structure," said Credit Suisse analyst Catherine Lim.

Lim argued that the equity dilution from the issue of new shares would be offset by the benefits of fundraising, including enabling the milk producer to grow through mergers and acquisitions.

* Huadian Power (1071.HK) jumped 3.5 percent to HK$2.65 after it said it would acquire 70 percent stakes in two in Shanxi-based coal miners for about 760 million yuan ($111.2 million) to ensure coal supply to the company's power plants. (Reporting by Parvathy Ullatil; Editing by Chris Lewis)