HK shares seen higher but China stocks may weigh

HONG KONG, May 25 (Reuters) - Hong Kong shares are seen
gaining on Monday after a three-day slump but gains may be
limited by likely downward pressure on mainland bourses as China
said it would resume initial public offerings as early as next
month.

China's surprise move to resume IPOs would likely pause a
rally in mainland stocks that lifted the benchmark index more
than 40 percent this year, said analysts.

"The landmark decision to start IPOs again will surely have a
cooling impact on stock prices, but I don't think the long-term
upward trend of the market will be reversed," said Huang Yan,
fund manager at Guotai Fund Management Co.

The IPO resumption plan, announced after the market closed on
Friday, will fuel worries about heavy supplies of new equity,
which are also being fed by a reform scheme for state-held shares
that is bringing previously untraded stock to the market.

But higher crude oil prices may support resources shares as
investors continue to buy into a big increase in Chinese demand
and a weaker U.S. dollar.
The benchmark Hang Seng Index .HSI dropped for a third
straight day on Friday, falling 0.8 percent to 17,062.52 as
investors chose to consolidate recent gains as doubts over the
pace of the recovery in the global economy crept in.

STOCKS TO WATCH-

* Laminate maker Kingboard Chemical (0148.HK) said it would
offer about US$63.25 million for the remaining shares of printed
circuit-board maker Elec & Eltek (EELT.SI), in which it already
owns 71.71 percent.

The Hong Kong-listed company said it would offer US$1.20 per
share in cash for all outstanding shares it did not already own
in the Singapore-listed unit, or 0.45 new Kingboard shares at an
issue price of HK$20.50 each, or a combination of both.

The move was aimed at streamlining the businesses of both
companies to improve efficiency and competitiveness, Kingboard
said.

For statement please click
here

* China's Weichai Holdings Group, Shandong Construction
Machinery Group Co and Shandong Auto Industrial Group would merge
to form a autoparts maker targeting more than 100 billion yuan
($14.6 billion) in sales by 2012, their listed units said on
Monday.

The government of eastern China's Shandong province has
approved the merger plan in principle, Weichai Power (2338.HK)
(000338.SZ), Shandong Juli Co and Shantui Construction Machinery
Co 000880.SZ said in separate exchange filings.

China has been encouraging consolidation in industries such
as steel and carmaking to build world-class companies that can
compete with overseas rivals.

----------------------MARKET SNAPSHOT @ 2246 GMT ------------

INSTRUMENT LAST PCT CHG NET CHG
S&P 500 .SPX 887 -0.15% -1.330
USD/JPY JPY= 94.65 -0.15% -0.140
10-YR US TSY YLD US10YT=RR 3.4495 -- 0.000
SPOT GOLD XAU= 956.3 0.05% 0.450
US CRUDE CLc1 62.09 0.68% 0.420
DOW JONES .DJI 8277.32 -0.18% -14.81
ASIA ADRS .BKAS 107.12 0.56% 0.60
-------------------------------------------------------------

MARKET SUMMARY
*Wall St slips late as budget worries linger [ID:nN22290059]
*Oil rises on China demand, dollar [ID:nSP480156]
*US dollar drops to 2009 low on ratings worries [ID:nN22547450]
*Treasuries selloff persists on debt worry, supply
[ID:nN22543365]

(US$1=HK$7.8)
(Reporting by Parvathy Ullatil; editing by Chris Lewis)