HK shares seen slowing as U.S. worries weigh

HONG KONG, July 8 (Reuters) - Hong Kong shares are expected to give up some of the previous session's strong gains on Tuesday, as worries over the U.S. housing market and a likely interest rate hike by the Fed haunt investors.

But lower oil prices and encouraging first-half earnings estimates from a clutch of locally listed firms should lend support to the Hong Kong market today.

"The underlying concerns of a weakening dollar, higher inflation and a possible rate hike remain the same, but sentiment has improved a bit owing to the positive profit estimates from the Chinese companies," said Ben Kwong, COO with KGI Asia.

"The main index still faces some resistance at the 22,000 level."

On Monday, U.S. bank stocks hit their lowest level in a decade after Lehman Brothers estimated that a proposed accounting rule would force Fannie Mae (FNM.N) and Freddie Mac (FRE.N), already battered by the subprime mortgage crisis, to raise as much as $75 billion between them.

Adding to the negative tone, San Francisco Federal Reserve President Janet Yellen sounded a cautious note on the economy, saying the risk of inflation was beginning to outweigh the risk of a deteriorating U.S. economy.

That indicates the Fed could be leaning toward raising rates. [ID:nN07445598]

Hong Kong shares jumped 2.3 percent on Monday, in their biggest gain in 13 weeks, to 21,913.06 on the back of strong advances in Chinese financials after positive earnings estimates from three banks.

Chinese banks rallied after China Merchants Bank (3968.HK) 600036.HK and China CITIC Bank (0998.HK) joined the nation's biggest lender, Industrial & Commercial Bank of China (1398.HK)601398.HK, in forecasting upbeat earnings.

STOCKS TO WATCH- * Shares in China Oilfield Services Ltd (2883.HK), China's largest offshore oil services group, will resume trade after it agreed to buy Norwegian peer Awilco Offshore AWO.OL for around $2.5 billion.

* China COSCO Holdings (1919.HK), the listed division of China's top shipping firm, said it estimated its net profit for the January-June period rose at least 90 percent, according to Chinese accounting standards. For more details, see here

* Junket aggregator Neptune Group Ltd (0070.HK) will pay HK$4.32 billion ($553.8 million) for 100 percent of Best Max, a wholly owned investment holding company, which operates Lucky Star, a junket and promoter at Galaxy Entertainment's (0027.HK) StarWorld Casino in Macau. For more details, see here * Foxconn International Holdings (2038.HK), the worst performing stock on the Hang Seng Index this year, was downgraded to sell from underperform by CLSA as it faces weakening handset demand.

The brokerage house cut its target price on the stock to HK$6.20 from HK$11.80 and forecast a 13 percent fall in 2008 earnings.

* Cheung Kong Holdings (0001.HK) has realised HK$23 billion from property sales in in the first half of 2008, exceeding its full-year target of HK$22 billion, the Soutch China Morning Post reported, citing an executive director in the company.

* Aluminium prices jumped almost 5 percent to a record high on Monday as power problems in top producer China revived supply worries, traders said.

Aluminium Corp of China (Chalco) (2600.HK) (601600.SS), said the firm's two aluminium smelters -- with combined capacity of 500,000 tonnes -- in Shanxi province had tight power supplies. ----------------------MARKET SNAPSHOT @ 00:10 GMT----------------

INSTRUMENT LAST PCT CHG NET CHG S&P 500 .SPX 1,252.31 -0.84% -10.590 USD/JPY JPY= 106.94 -0.2% -0.230 10-YR US TSY YLD US10YT=RR 3.913 -- 0.004 SPOT GOLD XAU= $924.40 -0.11% -1.050 US CRUDE CLc1 $141.27 -0.07% -0.130 DOW JONES .DJI 11231.96 -0.50% -56.58 ASIA ADRS .BKAS 145.85 0.26% 0.38 ----------------------------------------------------------------> SE Asian Stocks-Mostly lower; property lifts Singapore [.SO] > US STOCKS-Financial worries weigh on Wall Street [.N] > Oil drops on profit-taking, easing Iran tensions [O/R] > FOREX-Dollar rises against yen as stocks recoup losses [USD/] > TREASURIES-Bonds rally as stock losses revive safety bid [US/] > Gold cuts loss as dollar slips, oil weighs [GOL/] (Reporting by Parvathy Ullatil; Editing by Anne Marie Roantree)