* SSEC +0.1 pct, CSI300 -0.2 pct, HSI -0.4 pct
* China factories likely to post solid growth in Aug - poll
* Units of Guodian surge on plans of Shenhua merge
SHANGHAI, Aug 29 (Reuters) - Hong Kong stocks fell on Tuesday in line with losses in other major global markets after North Korea fired a missile over Japan, escalating geo-political tensions.
But equity markets in China, an economic ally of North Korea, remained around 20-month highs, bolstered by robust earnings reports and expectations of further restructuring of state-owned firms which could lead to more mergers and acquisitions.
Hong Kong’s benchmark index Hang Seng dropped 0.4 percent to 27,763.09 points by the lunch break, while the Hong Kong China Enterprises Index lost 0.3 percent to 11,310.61.
North Korea fired a missile early on Tuesday that flew over Japan and landed in the Pacific about 1,180 km (735 miles) off Hokkaido. The test is seen one of the most provocative ever from the reclusive state.
However, Hong Kong-listed Chinese real estate shares bucked the trend, with property giant China Evergrande Group jumping 3.7 percent after it pledged to slash debt by 2020.
Mainland China stocks appeared little fazed by North Korea, as they are largely driven by domestic factors.
After two sessions of solid gains, the CSI300 index fell 0.2 percent to 3,834.33 points while the Shanghai Composite Index gained 0.1 percent to 3,364.72.
Investors are awaiting more corporate earnings before month-end, and the latest readings on the health of China’s factory and service sectors.
China’s factories likely posted another solid month of growth in August, suggesting the world’s second-largest economy is still growing at a healthy clip despite rising financing costs and a cooling housing market, a Reuters poll showed ahead of an official survey on Thursday.
“We’ve seen improvement in sectors such as steel, coal and non-ferrous metal, thanks to supply-side reforms,” said Shanghai-based hedge fund manager David Dai.
“The uptrend in cyclical sectors will likely continue.”
The market has also drawn support from signs that the government is accelerating the pace of reforms for state-owned enterprises (SOEs).
China announced on Monday that top coal miner Shenhua Group Corp Ltd will take over China Guodian Group Corp , among the country’s top five state power producers, in a deal that will create the world’s largest power utility worth $278 billion.
Guodian’s listed units, including Guodian Changyuan Electric Power, Ningxia Younglight Chemicals, Yantai Longyuan Power Technology and Inner Mongolia Pingzhuang Energy Resources, soared on confirmation of the deal, which had been widely reported earlier.
Reporting by Samuel Shen and John Ruwitch; Editing by Kim Coghill