Hong Kong and China shares fell on Thursday, as investors took profits among financial and resources stocks, while data showing declining foreign direct investment into China also added to the pressure.

China's foreign direct investment shrank for the third consecutive month in January as firms in crisis-embroiled Europe slashed spending by over 40 percent, casting another pall over the outlook of the world's economic growth engine.

Hong Kong's benchmark Hang Seng Index and the Shanghai Composite Index both closed 0.4 percent lower. Both indexes, however, stayed above key technical levels that they breached on Wednesday, suggesting investors are still holding out for further gains.

The China Enterprises Index of the top mainland listings in Hong Kong slipped 1 percent. Turnover in Shanghai on Thursday was only marginally lower than Wednesday's, but declined about 31 percent in Hong Kong.

The Hang Seng Index is up more than 15 percent this year to date, paring the 20 percent loss of 2011, although analysts cautioned that much of the rally was fuelled by hot money chasing last year's laggard sectors.

Nothing has changed too much fundamentally in the last few weeks, but I don't think investors are looking to hedge against a sudden pull back just yet, Alan Lam, Greater China equity analyst at Julius Baer, told Reuters.

They might have been a bit too bearish last year and are playing catch up this year. With inflows likely to persist in the near future, there could be some more upside, he said, adding the inflows could revive fund raising efforts stalled by adverse market conditions late last year.

Bank shares fell after mainland media reported on Thursday that China's top four state banks had extended 30 billion yuan ($4.76 billion) in new local currency loans in the first 12 days of February.

That compares with an average of 600 billion yuan of loans a month between October and December, sparking concern that loan growth in February may have slowed.

In Hong Kong, China Construction Bank Corp (CCB) slipped 1.1 percent, while Bank of China Ltd declined 1.5 percent. Ping An Insurance slipped 2.2 percent from a six-month closing high following strong gains on Wednesday.

Bucking the broad market weakness, Chinese internet giant, Tencent Holdings rose 2.9 percent to HK$199.40, its highest close since last August. Traders attributed the gain to CLSA's raising its target price to HKD$260, expecting strong growth in its Weixin instant voice messaging platform.

On Thursday, London-based high-end jeweller Graff Diamonds filed a listing application for its planned initial public offering of about $1 billion in Hong Kong On Thursday, a source with direct knowledge of the IPO plans told Reuters.

RESOURCES STOCKS AMONG BIGGEST DRAGS

Resources-related stocks, some of which have led the rally since the turn of the year, were among the bigger losers. The Hang Seng Composite sub-index for material stocks was an underperformer, down 1.7 percent.

Citic Pacific, among the larger steel producers in the mainland, lost 2.3 percent in more than twice its 30-day average volume. Its sector rival, Angang Steel slumped almost 4 percent.

Zijin Mining Co Ltd , the largest gold miner in the mainland, lost 3 percent, also partly on lower gold prices. Its Shanghai-listed stock slipped 0.9 percent.

The materials and energy sectors were underperformers in Shanghai on Thursday. The Shanghai materials sub-index lost 0.7 percent, while a similar index for energy shares declined 1 percent.

Chinese oil majors, PetroChina Co Ltd and China Chemical & Petroleum Corp (Sinopec) were the top drags on the Shanghai Composite Index. Petrochina lost 0.8 percent and Sinopec shed 1 percent.

Shippers suffered on declining direct foreign investment data. Cosco Shipping lost 2.9 percent in more than four times its 30-day average.