January 9, 2017 / 5:24 AM / a year ago

China stocks rise, led by defence industry; Hong Kong largely flat

* SSEC +0.6 pct, CSI300 +0.5 pct, HSI flat

* China 2016 GDP growth expected to have hit target

* Defence stocks rebound sharply

SHANGHAI, Jan 9 (Reuters) - China stocks started the week on a firmer note on Monday, led by defence stocks that surged after a state-run tabloid said China would seek to “take revenge” should U.S. President-elect Donald Trump abandon the “one-China” policy.

Hong Kong stocks were little changed as investors locked in profits after a recent rally, while keeping a close watch on the yuan and the U.S. dollar.

The CSI300 index rose 0.5 percent, to 3,364.76 points at the end of the morning session, while the Shanghai Composite Index gained 0.6 percent, to 3,171.87 points.

The market was boosted by news that China was expected to have achieved economic growth of 6.7 percent in 2016, within a targeted range set earlier.

The volatile Chinese currency remained a focus in the market.

The central bank’s official yuan midpoint saw its steepest decline in percentage terms in more than six months on Monday, after weekend data showed foreign exchange reserves declined to near six-year lows, raising concerns about China’s ability to continue to support its currency.

Sectors gained ground across the board on mainland markets.

An index tracking the performance of aerospace defence industry rebounded sharply, up more than 3.4 percent at midday, after the Global Times said in an editorial on Monday that China would seek to “take revenge” should Trump ditch the “one-China” policy.

Shares of oil majors also rose, despite a fall in oil prices , after China pledged to extend tax waivers for importing some equipment for oil and gas development.

In Hong Kong, the Hang Seng index was little changed at 22,511.88 points, while the Hong Kong China Enterprises Index lost 0.2 percent, to 9,588.94 points.

Investors stayed cautious as the U.S. dollar held gains from the previous session after data showed a rebound in U.S. wages, pointing to sustained labour market momentum and more rate increases from the U.S. Federal Reserve.

“The dollar was still on track to rise this year and its influence on the Hong Kong market is not over yet,” said Linus Yip, strategist at First Shanghai Securities Ltd.

Yip said investors were locking in profits after the main index rose for two weeks. But they were still keeping a close eye on the path of the yuan and U.S. interest rates.

“The sharp rise in offshore yuan last week gave the stock market an excuse to rise, but the overall influence isn’t a lot in the long term,” he said.

Most sectors rose in Hong Kong, with energy sector the biggest gainer, helped by gains in both mainland miners and oil majors.

Reporting by Jackie Cai and John Ruwitch; Editing by Amrutha Gayathri

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