China shares down, HK set for worst month since 2008 crisis

Hong Kong shares are poised to post the worst month since the 2008 financial crisis despite a third session of slim gains on Wednesday on the back of oil counters, but thin overall turnover continued to point to a lack of conviction in the rally.

The worsening euro zone debt crisis and a downgrade of the long-term credit rating of the United States in early August combined to rattle global markets. Data suggesting the U.S. could be slipping into another recession further kept markets weak.

In theory, China should be the best place to be right now, but what we are seeing are some disappointing earnings numbers coming through and a very strong negative policy bias, , BNP Paribas deputy head of Asia equity research Erwin Sanft told Reuters Television.

The Hang Seng Index has rebounded almost 5 percent from its August low, but market watchers are not convinced the rebound will be sustained, with analysts only beginning to alter their earnings outlooks.

The Shanghai Securities News reported on Wednesday that total first-half net profit for listed Chinese companies rose at a slower pace compared with the same period last year.

The Hang Seng Index was up 0.35 percent at 20,274.34 by the midday trading break, with the energy sub-index the standout outperformer, up 1.29 percent as higher oil prices lifted heavyweight oil counters.

Brent crude hovered at $114 per barrel on Wednesday after posting six days of gains on expectations the United States will act again to try to stimulate its economy and boost fuel demand.

CNOOC Ltd gained 3 percent and was the top boost on the Hang Seng Index. PetroChina Co Ltd gained 0.5 percent.

STEEL NAMES DRAG SHANGHAI LOWER

The Shanghai Composite Index was off 0.7 percent at 2,548.2 by midday, weighed down by steel companies after Baoshan Iron & Steel Co Ltd (Baosteel) reported a 37 percent fall in first-half net profit.

Strength in alcohol makers limited the market's fall after Wuliangye Yibin Co Ltd said it would raise its product price by 20-30 percent from Sept. 10, sending its shares up 1.7 percent.

In a market lacking clear policy signals, those defensive and anti-inflationary stocks should be in focus, said Zhang Gang, senior analyst at Central Securities in Shanghai.

Analysts said the index could face a short-term liquidity shortage after the central bank widened the base for calculating required reserves and investors remained cautious ahead of key economic data for August.

Baosteel, China's biggest listed steelmaker, dropped 1.5 percent, while Inner Mongolia Baotou Steel Union Co Ltd lost 2.4 percent.