January 20, 2017 / 5:02 AM / a year ago

China stocks up on stronger Q4 GDP growth; HK down, all eyes on Trump

* SSEC +0.5 pct, CSI300 +0.7 pct, HSI -0.6 pct

* China Q4 GDP grows 6.8 pct, slightly better than expected

* Trade friction concerns rise ahead of Trump’s inauguration

SHANGHAI, Jan 20 (Reuters) - China stocks rebounded on Friday morning as data showing stronger-than-expected fourth quarter GDP growth bolstered blue-chips, while bargain hunting helped small-caps recover much of the losses suffered earlier in the week.

But underlying caution prevailed ahead of Donald Trump’s inauguration as the 45th U.S. president later in the day, reflecting worries about the new U.S. administration’s potentially detrimental China policy - a concern that dented Hong Kong shares.

The blue-chip CSI300 index rose 0.7 percent, to 3,352.25 points at the end of the morning session, which would mean a weekly loss of roughly 1 percent. The Shanghai Composite Index gained 0.5 percent, to 3,118.03 points.

At the end of a volatile week, market sentiment improved after China reported economic growth of 6.8 percent in the fourth quarter, exceeding market expectations.

The data raised expectations of solid corporate results as markets also look to looming earnings season.

Still, some analysts were wary of the headwinds in a Trump-led White House, potentially sparking trade friction with China during his term.

“The key risk is Trump’s trade policy. The external risk of China is obviously heightened, at the same time how Fed will move policy rates in the U.S,” said Raymond Yeung, chief economist of Greater China for ANZ in Hong Kong.

That view was echoed by Zhang Qi, analyst at Haitong Securities, who said companies in eastern China will likely face greater pressure on exports if Trump carries through with his protectionist policies.

All sector in the mainland market made modest gains by the lunch break, with consumer discretionary stocks among the best performers, with an index tracking the sector up around 1.3 percent.

China’s start-up tech-heavy ChiNext rebounded strongly, up 2.5 percent as recent sharp falls attracted bargain hunting.

Hong Kong

In Hong Kong, the benchmark Hang Seng index dropped 0.6 percent, to 22,907.86 points, while the Hong Kong China Enterprises Index lost 0.6 percent, to 9,734.38 points.

The benchmark index has lost 0.1 percent so far this week, threatening to snap a three-week winning streak if losses aren’t pared in the afternoon.

Interest-sensitive stocks including property developers and utilities firms retreated around 0.7 percent at midday, after Federal Reserve Chair Janet Yellen said that the U.S. central bank should continue to raise interest rates slowly to keep jobs plentiful and inflation low. The city’s interest rates usually follow the United States, thanks to a currency peg to the greenback.

Energy sector extended Thursday’s losses and fell more than 1.2 percent, partially dragged by index heavyweight PetroChina Co Ltd and CNOOC Ltd.

Reporting by Jackie Cai and John Ruwitch; Editing by Shri Navaratnam

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