HK shares seen range-bound, but China banks to gain

HONG KONG, July 7 (Reuters) - Hong Kong shares are expected to trade in a narrow range on Monday, after the long holiday weekend in the U.S. and amid a lack of fresh triggers from mainland China.

But Chinese banks may extend Friday's gains and prop up the overall index after two more mainland lenders joined Industrial & Commercial Bank of China (1398.HK) in making bullish profit forecasts.

"The Hang Seng Index should trade between 21,300 and 21,500, with Chinese banking stocks lending some support. But it is unlikely we will see strong gains today," said Conita Hung, head of equity markets with Delta Asia Financial Group. Hong Kong shares closed up 1 percent at 21,423.82 on Friday, with Chinese financials gaining after a positive earnings estimate from the nation's biggest bank, but turnover dropped to its lowest level this year ahead of the independence day holiday in the United States.

ICBC, the world's largest lender by market capitalisation, said on Thursday its first-half profit grew at least 50 percent, based on Chinese accounting standards. [ID:nHKG350323]

STOCKS TO WATCH- * Bourse operator Hong Kong Exchnages & Clearing (0388.HK) may come under selling presure after Morgan Stanley cut its target price on the stock to HK$85 from HK$120, saying the stock was expensive given the current downtrend in the market.

The stock closed on Friday at HK$107.10.

* China Merchants Bank (3968.HK) 6013968.SS estimated on Friday that first-half net profit more than doubled, following ICBC's positive earnings estimate.

Merchants Bank, the country's No.6 lender, cited growth in loans and non-loans services income for the boom in net profit. It posted 6.12 billion yuan ($892.1 million) in net profit in the first half of 2007, under Chinese accounting standards.

* Joining its bigger rivals, China CITIC Bank (0998.HK) late on Friday estimated a 150 percent leap in net profit for the January-June period, up from roughly 3.2 billion yuan ($466.6 million) for the same period last year, according to PRC accounting standards. The gains are partly due to increases in the firm's net interest margin. For details, see here

* China Eastern Airlines (0670.HK) said late on Friday it had closed sale and leaseback agreements for three Airbus A340 series aircraft. The unaudited book value of the aircraft is 1.29 billion yuan ($188.1 million). Based on current rates, the rental fee for each aircraft will be around 20 million yuan per quarter. For details, see here Separately, China Eastern was the first mainland airline to be given approval to establish an office on Taiwan, the South China Morning Post reported.

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INSTRUMENT LAST PCT CHG NET CHG S&P 500 .SPX 1,262.90 0.11% 1.380 USD/JPY JPY= 106.75 -0.03% -0.030 10-YR US TSY YLDUS10YT=RR 3.987 -- 0.000 SPOT GOLD XAU= $930.95 -0.14% -1.350 US CRUDE CLc1 $144.24 -0.72% -1.050 DOW JONES .DJI 11288.54 0.65% 73.03 ASIA ADRS .BKAS 145.47 0.57% 0.82 ---------------------------------------------------------------> > U.S. stocks' escape from bear up to oil, GE [.N] > Oil falls below $144, Iran responds to nuclear offer [O/R] > FOREX-Euro hits 1-wk low vs dlr, punctured by Trichet [USD/] > TREASURIES-Short maturity debt gains on weak jobs [US/] > Gold steady as inflation fears balance dollars [GOL/] > SE Asian Stocks-Malaysian falls to 16-mth low [.SO] (Reporting by Parvathy Ullatil; Editing by Anne Marie Roantree)