HK shares drift lower on caution; Huiyuan soars

* Huiyuan Juice soars on possibility of Coke tie-up

* Blue-chips slip ahead of key Q1 earnings

* ZTE drops on broker downgrades after earnings

(Updates to midday)

By Parvathy Ullatil

HONG KONG, April 24 (Reuters) - Hong Kong shares dipped 0.4 percent lower by midday on Friday amid caution ahead of key first quarter corporate earnings next week.

China Huiyuan Juice (1886.HK) briefly jumped more than 24 percent to a five-week high on Friday as news that Coca-Cola (KO.N) was in informal talks with the company fuelled renewed hopes for a possible tie-up between the firms. [ID:nHKG255060]

Shares in China's top juice maker hit HK$6.3 before retreating slightly to HK$5.84, up 15.4 percent. After Coke's buyout deal was scuttled by Beijing in March, shares in the Chinese juice maker had shed more than half their value.

"Coke has deep pockets, they have budgeted $2 billion for this market and Huiyuan can benefit from Coke's ability to spend heavily on marketing and advertising, its relatively superior distribution network and the way it can push out new products quickly," said Renee Tai, analyst with CIMB-GK Research.

The benchmark Hang Seng Index .HSI was down 66.14 points at 15,148.32.

Shares worth HK$31 billion changed hands, compared with midday Thursday's HK$28.7 billion. Turnover had dropped to a two week low on Thursday despite a 2.3 percent rebound in the market, suggesting the upside to the market could be short-lived, said analysts.

"Patient investors may want to stay in cautious mode and continue to watch out for volatility," said Wilson Wong, analyst with Taifook Securities.

But bourse operator Hong Kong Exchanges & Clearing (0388.HK) added 2 percent on the improved earnings outlook as turnover on the exchange picked up pace, climbing to a daily average of HK$65 billion so far in April from under HK$45 billion in the first quarter of 2009.

Handset makers also outperformed, rising sharply for a second straight day after Goldman Sachs raised its rating on the stocks. The world's largest cellphone maker, Foxconn International Holdings (2038.HK), vaulted 9.2 percent after the brokerage upgraded the stock to neutral from sell on an improved outlook from its customers Nokia and LG.

BYD Electronics (0285.HK) which was raised to a buy from neutral also rose by a similar percentage.

The China Enterprises Index .HSCE of top mainland companies gained 4.19 points to 8,943.28.

Chinese telecom equipment maker ZTE (0763.HK) dropped 5 percent despite posting 29 percent growth in its first-quarter earnings amid strong revenue growth and stable profit margins, as analysts deemed the stock too expensive after its recent run-up.

HSBC downgraded the stock to neutral from overweight after the stock rose over 250 percent from its November 2008 lows, driven by a surge in capital expenditure by China's wireless companies. Nomura cut the stock to neutral from buy, arguing that the potential benefits of the increased capex spending was already factored into ZTE's share price.

Gold miner Zijin Mining (2899.HK) rose 3.4 percent to HK$6.01 after the price of the precious metal rallied to a three-week high overnight.

(Editing by Ken Wills)