* Hang Seng index drops 0.9 pct, materials weak
* Shanghai Comp edges up, transports gain
* HK midday turnover lowest in 2011 as investors get defensive (Updates to midday)
By Vikram Subhedar and Clement Tan
HONG KONG, July 11 (Reuters) - Hong Kong shares fell on Monday on profit-taking after three straight weeks of gains as economic data from the United States and China disappointed, but a stable mainland market and strength in defensives helped limit declines.
The Hang Seng index fell 0.9 percent to 22,525.5 by the midday break, slipping further below its 250-day moving average around 22,783 that has proved a stiff resistance over the past week. The China Enterprises index of top locally listed mainland firms fell 1.3 percent.
On the mainland, the Shanghai Composite rose 0.1 percent to 2,800.2 by the midday trading break. Airline stocks climbed, led by Air China , on reports that China will invest $1.5 trillion yuan ($232 billion) in the aviation industry in the next five years.
“The market doesn’t seem to be reacting too adversely to the inflation and trade data over the weekend,” said Zhang Qi, an analyst with Haitong Securities in Shanghai.
“It’s uncertain what the slightly downside surprise in data would mean for profitability at the moment so people are just waiting and seeing for now.”
Water resources-related counters also saw gains supported by policy moves after Chinese President Hu Jintao announced water reforms as a cornerstone of national infrastructure priorities at a conference over the weekend.
Anhui Water Resources Development Co Ltd rose 5.1 percent while Gezhouba , operator of massive projects along the Yangtze river, rose 3.1 percent.
Power utilities posted mild gains in Hong Kong as investors sought safety in weak markets, a pattern seen repeatedly over the past month.
Turnover on the Hong Kong exchange, at HK$25.4 billion ($3.2 billion), was the lowest midday turnover seen this year.
Companies issuing profit-warnings saw sharp losses with steel company Angang Steel suffering a 6.7 percent drop after it warned of a first-half loss.
Sportwear maker China Dongxiang plunged 18 percent after it said it expected lower profit margins and sales for the first half, echoing a similar warning from Li Ning Co last week.
Corporate earnings from Chinese companies, expected later this month, are likely to set the tone for markets in the second half of the year at a time when valuations are below historical levels.
“China is looking very cheap but we would stick to the consumer-related plays for now (rather) than mining and the industrials...going into the second half, I think the market should perform well,” said Khiem Do, head of the Asia multi-asset group at Barings Asset Management in Hong Kong.
On a forward 12-month price-to-earnings basis the China Enterprises index is trading at about 8.7 times, the lowest in over 2-1/2 years, according to Thomson Reuters data. ($1 = 7.782 Hong Kong Dollars) (Additional reporting by Saikat Chatterjee; Editing by Jonathan Hopfner)