* Shanghai index rises 0.8 pct; Hang Sang falls 0.3 pct
* Trump-Xi meet likely; U.S. officials to visit China
* China’s factory activity drops more than expected
HONG KONG, Feb 1 (Reuters) - Chinese stocks rose on Friday, ahead of the week-long Lunar New Year holidays, after Beijing and Washington hailed progress in their trade negotiations, but weak local economic data capped gains. ** At the midday break, the Shanghai Composite index was up 0.8 percent at 2,604.57 while the blue-chip CSI300 index was up 0.9 percent. ** The financial sector sub-index rose 0.3 percent, the consumer staples sector was up 1.3 percent and healthcare shares traded 2.9 percent higher. ** The smaller Shenzhen index was up 1.8 percent and the start-up board ChiNext Composite index was higher by 2.4 percent. ** U.S. President Donald Trump said on Thursday he will meet with Chinese President Xi Jinping soon to try to seal a comprehensive trade deal, noting that Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin were invited to bring a U.S. negotiating team to Beijing around mid-February. ** The comment came after the latest round of Sino-U.S. trade talks in Washington, and a meeting between Trump and Liu He, Chinese vice premier. The Chinese delegation said in a statement that the two days of high-level talks made “important progress,” official Xinhua news agency reported. ** China’s factory activity shrank by the most in almost three years in January as new orders slumped further and output fell, a private survey showed. ** The gloomy readings were more downbeat than an official survey on Thursday, which also showed growing strains on China’s manufacturing sector, a key source of growth and jobs. ** The divergence “is really a dichotomy between the large state-owned and domestically focussed firms supported by bank lending and PBOC monetary and credit stimulus measures, and the smaller, more externally focussed private sector,” Robert Carnell, chief economist and head of research for Asia-Pacific at ING, wrote in a note on Friday. ** Stocks fell around the region after the lacklustre data. MSCI’s Asia ex-Japan stock index fell 0.1 percent while Japan’s Nikkei index was close to flat. ** Weighed down by a fall in regional markets and local property stocks, Hong Kong’s Hang Seng Index was down 0.3 percent at 27,854.79 points. But Chinese H-shares in the city edged up 0.1 percent. ** The yuan was quoted at 6.7285 per U.S. dollar, 0.43 percent weaker than the previous close of 6.6995. ** The largest percentage gainers in the main Shanghai Composite index were shares of EGing Photovoltaic Technology Co Ltd , up 10.2 percent, followed by Beijing Jingyuntong Technology Co Ltd, gaining 10.1 percent and Jiangsu Changjiang Electronics Technology Co Ltd, up by 10 percent. ** As of midday, China’s A-shares were trading at a premium of 16.79 percent over the Hong Kong-listed H-shares. ** The Shanghai stock index is above its 50-day moving average and below its 200-day moving average. ** In Hong Kong, the sub-index of the Hang Seng index tracking energy shares rose 0.7 percent while the IT sector rose 0.6 percent. The top gainer on the Hang Seng was WH Group Ltd, up 4.9 percent, while the biggest loser was Geeley Auto, down almost 2 percent.
Reporting by Noah Sin; Editing by Rashmi Aich