HONG KONG (Thomson Financial) - Hong Kong shares ended a volatile morning session flat on Friday, with investors discouraged by Wall Street's decline overnight on fresh worries about fallout from the subprime mortgage crisis.
Investors dumped U.S. shares after insurer American International Group unexpectedly posted a loss in the second quarter as it wrote down losses from its subprime-related investments.
Wal-Mart's warning about sales further dampened Wall Street's mood as it heralded a further decline in U.S. spending, which accounts for more than two-thirds of the U.S. economy.
'Obviously a backdrop of a global economic slowdown and weak corporate earnings is not conducive to the market,' said Howard Gorges, vice chairman at South China Securities.
'There is a lot of bad news that is bedeviling the market.'
The Hang Seng Index was up 3.26 points or 0.01 percent to end the morning at 22,107.46, off a high of 22,230.55 and a low of 21,980.63.
The local stock market opened down 0.5 percent following Wall Street's weakness, but turned higher as investors hunted for bargains.
Utilities and developers were among the top gainers on hopes for better earnings prospects.
Tycoon Li Ka-shing's Hong Kong Electric Holdings gained 2.6 percent to HK$48.55. The utility company reported this week that its first-half net profit rose 18 percent from a year earlier.
Hong Kong & China Gas jumped 2.3 percent to HK$17.54.
Hang Lung Properties, one of the top local developers, advanced 3.1 percent to HK$23.25, while Li's Cheung Kong Holdings added 1.7 percent to HK$110.60.
Banks were mostly lower following a slump in their U.S. counterparts. Index heavyweight HSBC Holdings lost 0.7 percent to HK$128.00 and China Construction Bank was down 0.7 percent at HK$6.79.
($1=HK$7.80)
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