Hong Kong stocks erased earlier

losses to close up 0.26 percent on Monday, as investors hunted

for bargains after shares fell to three-week lows, but concerns

about the state of the U.S. economy capped gains.

A narrowing in losses of index heavyweight HSBC (0005.HK)

also helped the key index to rebound from earlier losses.

HSBC closed down 0.98 percent, after falling by as much as

1.6 percent earlier in the day. Chief Executive Michael Geoghegan

expressed caution about growing too fast because he feared a

second economic downturn could force the bank to make write-downs. 

 The market has been down in the previous sessions, so there

was some bargain hunting, said Howard Gorges, a director at

South China Brokerage. A slight recovery in HSBC helped a bit.

The benchmark Hang Seng Index .HSI, which swung back to a

gain, finished up 53.58 points at 20,429.07. The index was down

0.2 percent at midday.

Hong Kong shares have fallen in six out of the last seven sessions 

to a three-week low on Friday.

Volume fell to HK$43.7 billion ($5.6 billion), the lowest since Sept. 15 

and down from Friday's HK$56.9 billion. A public holiday in China 

damped demand for Hong Kong stocks. China's equities markets will 

resume trading on Oct. 9.

Consumer goods exporter Li & Fung (0494.HK) lost 4.7 percent

on concern that a rising jobless rate would further cut consumer

spending in the U.S., one of Asia's top markets overseas.

U.S. employers unexpectedly shed more jobs in September than

in August, highlighting the fragility of the economy's recovery

from its worst recession in 70 years.

U.S. consumer spending has been the engine of growth for the

global economy. Now that engine has stalled as the unemployment

situation worsens, said Francis Lun, general manager at

Fulbright Securities.    

The China Enterprises Index .HSCE of top locally listed

mainland Chinese stocks was up 1.03 percent at 11,645.05, led by

a 4.11 percent gain in Anhui Conch (0914.HK).

Chinese cement maker Anhui Conch rose on speculation that

rival China Resources Cement (1313.HK) would do well on its

trading debut in Hong Kong on Tuesday. That prompted investors to

buy shares of firms from the same industry, traders said.

China Resources Cement saw the retail portion of its HK$6.39

billion IPO oversubscribed by 81.6 percent, the Sing Tao Daily

reported on Monday.

Toys-to-property company RBI Holdings (0566.HK) extended

gains, up 8.2 percent. The stock more than tripled on Friday

after it said it would acquire Apollo Precision, a maker of

silicon-based thin film photovoltaic modules, for HK$4.18 billion

($539.4 million), to cash in on growing demand for solar energy

in China.

R&F Properties (2777.HK) gained 1.04 percent. The Chinese

developer received formal approval from China's Securities

regulator to issue up to 5.5 billion yuan ($805 million) worth of

local currency bonds, the Hong Kong Economic Times said.